The following are requirements of
operating
a corporation in the State of California:
STATEMENT OF INFORMATION - DOMESTIC STOCK CORPORATION (SECRETARY OF STATE)
The California Secretary of State requires every corporation incorporated in the state of California to file a Statement of Information - Domestic Stock Corporation within 90 days after filing of its original Articles of Incorporation and annually thereafter. There is a $25 fee due with the filing. As long as the Secretary of State has your current address, you should receive a form in the mail. However, it is important to file even if you don't receive the form in the mail because you can be penalized $250/year for failure to file. An on-line form is available on the SOS website as well as the ability to e-file the form.
CORPORATE MINUTES
It is important to maintain the corporate minutes in order to maintain your corporate status. Adding new stockholders, making large purchases, taking out loans or entering leases; these are just a few of the events which should be recorded in the corporate minutes. The size of your company and the complexity of the transaction involved will dictate whether it is necessary to involve an attorney. You can purchase do-it-yourself kits that will allow you to prepare the minutes yourself. These can be purchased from sources such as Nolo. For more information regarding corporated minutes read "Running a Corporation: Keeping the Minutes". There are also on-line services available for preparing and maintaining your corporate minutes such as LegalZoom.com.
CORPORATE BANK ACCOUNTS AND ACCOUNTING RECORDS
All corporations must have at least one checking account in its name and maintain accounting records. In addition the corporation might need to open a savings account, CD, pension account, investment account, etc. depending on its particular requirements. It is important that corporate and personal transactions are not comingled: for example, personal expenses of the officers/shareholders should not be paid directly from the corporate checking account.
PERSONAL PROPERTY TAX (COUNTY ASSESSOR)
In Los Angeles County businesses with equipment that cost more than $100,000 (inventory excluded) must file a Business Property Statement each year by April 1. Businesses with equipment that cost less than $100,000 are not required to make the annual filing, but are still subject to personal property tax based on an initial appraisal which can be later adjusted. The LA County Assessor website has more information as well as an on-line form. If you are in a county other than Los Angeles visit the county assessor website of your county for information.
MINIMUM FRANCHISE TAX (FRANCHISE TAX BOARD)
The Franchise Tax Board requires a minimum tax of $800 annually even if the corporation has no income or has a loss for the year (the minimum tax does not apply to the first year the corporation is required to file a tax return). The minimum tax should be paid in advance by April 15 using Form 100-ES to avoid penalties (i.e. by April 15, 2008 for the 2008 tax year) and applies to both C Corporations & S Corporations. If the corporation has income for the year the tax may be higher than the minimum: California tax rates for C Corporations is 8.84% (minimum $800) and the tax rate for S-Corps is 1.5% (minimum $800).
S CORP ELECTION (INTERNAL REVENUE SERVICE)
If you plan to operate as an S Corporation you must make a timely election with the Internal Revenue Service. Many times this is done by the attorney or other person who sets up the corporation. However, many times this requirement is neglected, causing headaches later on when the IRS determines the election was not made.
OTHER REQUIREMENTS
In addition to the above, there are many other requirements which apply to any business (not just corporations) depending on the circumstances. Examples are: business license, city tax returns, sales tax returns, payroll tax returns and filing 1099's. We can assist you in determing what is required for your corporation.
