Incorporate in California

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Incorporating in California is becoming more and more popular with entrepreneurs and business-minded individuals looking to increase their company's worth and ability to attract investors while decreasing their exposure to liability. Incorporating in California offers shareholders protection from business debts and lawsuits, potential taxation benefits, and increased confidentiality. There are a number of factors that must be considered before deciding that a California corporation is the best suited for your company. If these factors are applicable to you and your business, then California Incorporation can offer a substantial advantage to you and your company.

Lets examine what some of these factors, advantages, and even disadvantages might be.

California Incorporation - Factors to Consider

The decision to incorporate yourself or your company in California should be based on the business goals for your company, where you intend to conduct the business, and where you intend to bank and establish financial/credit footholds. If the vast majority of your business is to be conducted within the state, and you intend to open an account and establish lines of credit with a California bank, then it is easy to determine that this is the state you should incorporate in. The reason for this is that some states (like California) are now a bit more aggressive about digging into a corporation's transaction and banking history, especially if all of the business is conducted in that state, yet the company is incorporated in a separate, low-taxation and regulation state. These states are becoming more aware of the tax revenue they are relinquishing to "foreign" corporations and are finding it financially feasible to dig deeper. Further, incorporating in the state you will ultimately conduct the most business in will save your corporation from having to pay excessive franchise fees in more than one state.

While California may not necessarily be a taxation haven (with state corporate tax at about 9% versus federal corporate tax of 35%) because it does charge a "corporate tax," incorporating here can still offer considerable income and taxation benefits for your company if the proper formation decisions are made.

It is also imperative to remember that you observe the general corporate formalities once your corporation is formed. This will help ensure the integrity of your "corporate veil" and provide you and your corporation with the liability, asset, and tax protection and benefits that incorporating in California can offer.

Assuming that you indeed intend to conduct business in California, establish a financial foothold there, and observe the formalities, then it makes perfect sense to incorporate in California.

Advantages of Incorporating in California

• Asset Protection from Liability. Incorporating in California offers protection for Officers and Directors from personal liability against any lawsuits or business debts arising from the operation of the corporation or by actions committed on behalf of the corporation. The extent of liability exposure is limited to the amount of initial investment.
• Stock Flexibility. California corporations may sell, transfer, gift, or purchase shares of it's own corporate stock. A corporation may issue stock for cash, property and services. Directors can determine the worth or value of the stock, and the stock can be in any quantifiable form: property, capital value, liquid funds, etc.
• Credibility. California Incorporation will increase the "credibility" of your company, and will increase the amount of investor interest in your company. It speaks of "serious business" when your company is incorporated.
• Management Flexibility. California only requires three officer positions: president, chief financial officer and secretary. These three positions may be filled by one person. If a California corporation has two shareholders, there must be at least two Board members. If there are at least three shareholders, then there must be at least three members on the Board.
• Confidentiality. Only the director and the resident agents are disclosed as a matter of public record in California. Stockholders' names are not a matter of public record. Further, depending on the type of formation (LLC, etc.), a corporation can hold shares of stock.
• Tax Advantages. California corporation taxes are only 9%, with sizable advantages available depending upon the type of corporation formed.

It should be apparent that incorporating in California offers a tremendous amount of benefits in the form of protection from liability, asset protection, taxation, and business flexibility. If you incorporate in California you will make your company more creditable, and the increased creditability will be an excellent way to attract investors all the while safeguarding shareholders' personal assets from liability. With a diligent implementation and business development strategy, you can build your business into a highly competitive, investment-attracting entity.