When it comes to business incorporation in the state of California, it seems that more and more aspiring entrepreneurs are thinking of going down that road. Because a Subchapter S corporation is not subject to federal income tax, it is the choice of many.
It doesn’t come as a surprise since the procedure of setting up an S corp in California itself is not overly complex. Most importantly, operating this type of business does not require you to cope with overwhelming requirements, making it the next big step for a fast-growing start-up.
Why choose S corp as the structure of your corporation?
The main reason to make this choice is that an S corp is seen as a pass-through entity by the IRS. In other words, profits and some of the losses are passed through to the personal income of the owner without being subject to corporate tax rates that apply to C corps.
Do you have to incorporate your business?
Business incorporation is not a requirement, but it is usually a step in the best interest of a small company with excellent growth prospects. It is also the recommended course of action for small business owners who’ve worked hard to build their company from the ground up as it allows them to protect their own interests by limiting their personal liability for the company obligations going forward.
What happens when a company becomes incorporated?
Once a company has been incorporated, the individuals who founded it find themselves in a far better position because their liability is reduced to a considerable extent. Namely, an incorporated business becomes separate from its founding individuals.
These are the benefits that make business incorporation a sound decision for your business:
- personal liability is limited and personal assets of the owner are protected
- the business may be conducted nationwide
- the company’s perpetual existence is guaranteed
- the company’s name is protected
- legitimizing the business
- stock options being made available to employees
- raising investment capital
- deductible expenses
- tax flexibility
Where do I go to incorporate my business?
As both first-time and veteran business owners prefer to focus on the business itself instead of the technicalities, they often opt for professional business incorporation services. When professionals take over the process of business incorporation, they make sure that no step is overlooked and that everything goes quickly and efficiently.
Below is an overview of the steps you need to take in order to incorporate. Bear in mind that you can delegate the following tasks to a professional team specializing in the provision of business incorporation services.
- Choosing a unique company name (other general guidelines and restrictions apply)
- Choosing a business address (mailing address)
- Incorporating a list of the incorporators in the articles of incorporation (which may also list the initial board of directors)
- Listing the number of shares of stock the corporation may issue in the articles of incorporation
- Listing the names of shareholders (business owners) and the number of shares issued to each in internal corporate records
- Specifying the physical address and authorized person in the state of incorporation (registered office and registered agent) in the articles of incorporation
- Writing bylaws that will govern the way your corporation operates
Setting up an S corp in California quickly and easily
San Diego, home to breathtaking places such as Mission Bay Park, is also the ideal city for aspiring business owners and a city where you will find us, David York’s Tax Service. Our team of experts is available to you at your convenience and for a vast variety of services.
If you are a successful small business owner trying to decide between different incorporated business types but leaning toward setting up an S corp, allow us to step in and help you make the right call and take the right steps. If you’ve already made the decision, allow us to navigate you through the process and take care of the technicalities. Give us a call today.