Incorporating a Company in California and Potential Tax Issues

Incorporating a Company in California and Potential Tax Issues

Setting up a business in California is nothing less than a dream. Not to mention, this large and wealthy state is a house to various industries such as technology, agriculture, and entertainment. Thereby, your business may get plenty of exposure once incorporated successfully in The Golden State.

Plus, you should consult with a certified attorney regarding legal formalities. This step will ensure smooth completion of pre and post business requirements. Building a business in the state requires a series of steps, and you must learn the following before beginning.

 Business Name

Investing time in picking a company name can save you from various business problems. The title should be unique whether you operate nationally or internationally. Make sure to keep it easy to pronounce/understand. You can even search your proposed name on Bing or Google to identify potential conflicts.

Moreover, searching US Patent and Trademark Office (USPTO) for trademark will clarify if selected name is acceptable or not. Don’t forget to search for plurals, spelling variations, and sound alike to double-check it’s not registered already. You should go through California Secretary of State’s Business entity database in this context as a minor similarity amongst names leads to rejection.

Also, you need to include a correct corporate identifier to your business name like incorporated, corporation, or at least an abbreviation. You should not opt for words such trust, trustee, insurer, or bank, etc.

 Business Structure

You can choose a structure from three basic options.

1.    A Corporation

This option provides liability protection to the owner. A corporation includes officers, shareholders, and directors. The structure is complicated, however, an ideal choice for great startups that plan to elevate funding in future.

2.    A DBA or “Doing Business As”

A DBA is also called a Fictitious Business Name or FBN. That isn’t a separate structure idea that partners or individual can use as the business name.

3.    “Limited Liability Company” or an LLC

An LLC allows you to run a business without a hassle of directors, officers, and taxation. This structure provides liability protection with less complexity and tax as compared to a corporation business option.

Register your Business

Incorporating a company in California requires:

  • Form or documents ARTS-GS filing with the California Secretary of State Corporation Division
  • Conduct an organizational meeting to take note of ownership of each shareholder along with to-do tasks such as payback pre-incorporation expenses, open an official bank account, and elect S-Corporation status

Tax Issues

Taxation problems occur due to inappropriate record-keeping and underpayment of taxes. In most cases, a consumer pay sales tax but the business owner neglects to pass it to the state. The BOE can hold employees, business owners, and people associated with the company’s operation responsible in this context. You should pay personal income tax as the estimated quarterly tax isn’t optional.

You may encounter penalties and interest on the unpaid amount if you don’t pay tax on personal income – full, on time. Moreover, poor record-keeping may land you in trouble when you file tax and during the process of audit. You cannot defend your deductions if you don’t provide accurate receipts. Not every business owner has the expertise to deal with taxation. That is why you need a lawyer to get potential tax issues fixed for you.

Bottom Line

Call Earl Jiang at 866-263-7866 and seek legal help on incorporating a company in California.

 

Comments are closed.
%d bloggers like this: