Small Business Legal Advice for Filing Articles of Incorporation

Setting up a business in California? On this page, corporate attorney Andrew Gale describes the process of preparing and you’ll discover what information is required by the state and important details on each requirement. Use the links below to skip to a topic of interest.

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You’ve finally decided you want to incorporate your business. You probably have questions. Like many business owners, you wonder what steps you need to take first. And you need to know which documents the state requires to set things in motion.

Whether you own a large company – like Cisco Systems or Facebook – or a small mom-and-pop shop, the requirements for forming a legal corporation remain the same. It starts by filing articles of incorporation.

This crucial corporate record acts as the charter for your corporation. It includes information like the corporate name, a business purpose statement, and the number of authorized shares the corporation can issue. In some states, it’s known as a “certificate of incorporation” or “corporate charter.”

The form can be long and complicated, usually tailored by a fleet of business lawyers. Such is the case for large companies like Cisco Systems. However, the form might also be short and require just a few minutes to complete. It’s essential to get it right. If you’re confused about which form is right for your business or how to fill it out correctly, a small business lawyer in Orange County, California can help.

Once completed, simply submit the form to the Secretary of State. For specific details, see the instructions below on submitting articles of incorporation to the Secretary of State in California.

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What’s required on the form?

Filing forms for articles of incorporation vary by state. California’s minimum requirements include the following, with the exception of “Directors” (which we’ve listed because it’s required in some states):

Corporate Name

The state asks that you provide the name of your corporation, and it should read exactly as you want it to appear on the corporate records. Some states require the inclusion of words like “corporation” or “incorporated.”

Checking name availability

In most states, corporate names can’t be misleading or too similar to another registered corporate name. That’s why it’s important to check name availability before choosing a name.

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How to check name availability

• You can check name availability at no charge by sending a completed Name Availability Inquiry Letter to the Secretary of State’s office:

• Prepay Priority Telephone Service makes searching for name availability and reserving a name more convenient for those who frequently check name availability. After creating an account and submitting a deposit, you can perform name availability searches for $4.00 each and reserve a name for $10.00. The cost of the deposit is a minimum of $100.00 but may be adjusted depending on your expected usage of the service. To create a prepay account for Priority Telephone Service, send a request to the California Secretary of State’s Fiscal office using their online form or call (916) 653–1233.

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TIP: To perform a quick, unofficial check without submitting the name availability inquiry letter, use the Business Search link under “Online Search” on the Secretary of State’s website. You’ll find a simple form to use to check your proposed name and get instant – though unofficial – results. Simply choose the “Corporation Name” radio button under the search type, then type in the name you want to see if it’s available.

Note: The Secretary of State’s office only checks names against other names registered with the Secretary of State, not against trademark, service mark registrations, or fictitious business names. We recommend that you check them, as well, before filing your articles of incorporation. For more information, see the “General Information” section of the Name Availability Page on the Secretary of State’s website.

Reserving a name

You can reserve a name for 60 days by submitting a Name Reservation Request, either by mail or in person. Email and online requests to reserve a name are not accepted at this time. A name reservation fee of $10 should be included with your submission. Reservations can be renewed for the same party, but not for consecutive periods of time.

• To reserve a name by mail, send the request form, along with a check for $10 (payable to the Secretary of State) and a self-addressed envelope to:

• To reserve a name in person, drop off the form, along with the name reservation fee of $10, at the Secretary of State’s office in Sacramento (see above) or you may drop it off at the Los Angeles regional office located at:

If you choose to reserve a name in person (drop off), an additional $10 processing fee applies.

• For those who frequently reserve corporation names, Prepay Priority Telephone Service is recommended. See above for more information about the service.

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Corporate Purpose Statement

You should include language about the purpose of the business in general terms. California includes a statement that reads, “The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.” You can provide your own language if you choose to, but avoid specific information in case the scope of your business changes in the future.

Agent for Service of Process

California, like most states, requires an agent’s name and address for service of process in the event of a lawsuit. Any adult residing in the state qualifies, or you can name an active 1505 corporation (a corporation authorized by the state to act as an agent for service of process for other entities). You can’t list your own corporation as your agent.

Corporate Addresses

Most states want the street address of your business and a mailing address (if it differs from your street address).

Number of Authorized Shares

As you probably know, shares of stock represent an ownership interest in a corporation. They must be issued to someone. But be careful to whom you issue shares of stock; it can have unexpected tax consequences. What the state wants is the number of shares your corporation is authorized to issue.

One way to think about shares is that you’re creating a corporate treasury. The treasury contains all of the gold, but to activate it, it must be distributed to certain people.

A typical scenario for a corporation with one or two shareholders is to authorize 25,000 shares of stock, and then issue 5,000 shares to each owner. The issued shares represent 100% ownership of the corporation. When it’s time to add another shareholder, there are two options:

1. The owners of the corporation could sell some of their shares. For example, if there are two original shareholders, the first could sell 2,000 shares of her stock to a new, third shareholder. So, the first shareholder retains 3,000 shares, the second shareholder owns 5,000 shares and the third shareholder now owns 2,000 shares after the sale. The transaction would be reflected on the corporate ledger.
2. The owners could go to the corporate treasury and issue shares from the remaining 15,000. For example, a small business corporation could issue 5,000 shares to a new owner in exchange for cash, property, or services. There would now be three equal owners of the corporation, each with 5,000 shares.

As you can see from the above examples, it’s ideal to authorize more shares than you ever intend to use. Authorizing a large number of shares gives you the flexibility to issue more of them in exchange for funds, to add new owners, or even to give some of them as gifts. If you issue a small number of shares, you could limit your options down the road.

Classes of shares

The Articles of Incorporation of a General Stock Corporation (ARTS-GS) form dictates that only one class of shares may be issued. However, you can issue many classes of stocks. How? By customizing your articles of incorporation, which precludes the use of form the state provides. This can be complicated, and it’s recommended that you consult a California business attorney to help you avoid any pitfalls.

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Directors

Some states ask for the names and addresses of the directors in the articles of incorporation. For those incorporating in California, it’s not required.

Signature of all Incorporators

Finally, all incorporators must sign the articles of incorporation form and mail it, along with the filing fee, to the Secretary of State. In California, the fee is $100, but it varies for each state. In addition to the $100 fee paid to the Secretary of State, corporations in California must pay a minimum $800.00 annual tax to the California Franchise Tax Board. Contact California’s Franchise Tax Board for more information.

How to submit the completed form

Once the form is completed, you’re ready to submit it to the Secretary of State. In California, there are 3 ways to submit the form to the Secretary of State:

• Mail the form to the Secretary of State’s office at the following address:

Mailing the form involves a longer processing time, but there’s no service fee.

• Drop off the completed form at the Secretary of State’s office:

Dropping off the form gives you a faster processing time. A separate, non-refundable $15.00 service fee should be included when you drop off the completed form. In many cases, filing services can deliver the documents on the same day.

• Hire a filing service in Sacramento to drop off the form for you. If you don’t live or work in the Sacramento area, you can hire a filing service that will hand-deliver the form to the Secretary of State’s office for you.

No matter what kind of company you own, filing articles of incorporation is the first step when it comes to forming a legal corporation. The form may be simple or complex, and completing it correctly is critical. If you have questions or need help, don’t wait. Get the assistance you need to incorporate your business from an expert California Small Business Attorney. Call us today at +1 (714) 634-4838.

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