Registration of a company in California

California is the wealthiest and most populous state in the United States. The state is open to foreign investment, and non-resident entrepreneurs often choose the following areas: industry, transportation, finance, media, IT, and e-commerce. In addition, incorporating a new business in Los Angeles, San Francisco, San Diego, or any other California city is potentially profitable because of the following features of the jurisdiction.

Why register a business in California

In California, buying a company or starting a new one is potentially lucrative because the state is characterized by the following:

• openness to foreign investment;
• access to a large market;
• simplified conditions for company registration, including a remote format;
• California is a hub for startups;
• Silicon Valley is one of the world’s centers of the IT industry.

Organizational and legal forms

You can create a company in California or establish your legal presence alternatively by choosing one of several of the most common legal forms:

• A limited liability company (LLC) is the most flexible and commonly used form of business in California, which allows 100% foreign ownership and also assumes the limited liability of participants. They will not, under any circumstances, be liable for the investments in the enterprise. You need at least one member of residency and one director (also with no residency requirements) to establish this company. Simplified accounting and reporting rules apply.
• A corporation is a more complex legal form of organization and management designed to raise large amounts of capital. As with an LLC, the shareholders of this company will not be liable for potential losses of the company above the value of their shares. A corporation can be of several types: (1) S-corporation – can have up to 100 individual shareholders who can only be residents. Taxation within this corporation is at the shareholder level only. (2) S-corporation – this legal entity can have over 100 shareholders, including legal entities, and is intended for larger projects. This type of corporation has one nuance – double taxation. Taxes are paid by the corporation and the individual shareholders when distributing the company’s profits among them.
• A limited liability partnership is another form of business in which the liability of the participants is limited solely to the amount of their investment. A partnership requires a minimum of 2 participants, at least 1 of whom must be fully responsible for the collaboration’s results and manage it.

Registering other business forms in California, such as sole proprietorship, a branch, or a representative office, is also possible. Contact the lawyers at Prinancial for a detailed consultation on the legal form of business you are interested in.

How to register a business in California

1. You can open a business in California after going through the following steps:
2. Selection of the most appropriate legal form and the formation of a list of company activities.
3. Formulation and reservation of a unique commercial name for the company.
4. Requesting data and documents necessary for the company’s registration, including its shareholders and directors.
5. Registration of an official address for the company.
6. Drawing up the relevant constituent documents and filling out the application forms.
7. Submission of the required documents, including a bank statement on payment of the registration fee, to the Registrar at the State Secretariat for review. Creation of an entry of the new legal entity in the Registry of Companies, followed by issuing a certificate of incorporation.
8. Registration for payment of mandatory tax and social costs. Obtaining an EIN for the employer.
9. Opening of corporate bank accounts.
10. Obtaining additional licenses and permits that may be required for certain regulated activities.

Legislation and regulatory environment

California is open to foreign investment and creates all the conditions for it. In particular, this manifests in simplifying registration procedures, including the possibility of completing them online, providing benefits, and a streamlined process for foreign entrepreneurs to obtain a residence permit. In most sectors, a permit or license will be required.

The main aspects of taxation in California

Companies incorporated in California pay income tax at a rate of 8.84%. Individuals pay tax on their income at 1-13.3% (depending on the payment amount and the taxpayer). California also levies a sales tax (analogous to VAT) at a rate of 7.25%. These rates apply at the state level, but you should also consider the rates of municipalities and federal taxes. For example, if you receive a positive difference between the federal, state, and municipal tax amounts, that difference must also be paid to the state.

Dividends are taxed at the appropriate income tax rate. However, taxation of interest, royalties, and capital gains are nuanced. Prifinance lawyers are ready to help you understand all the specifics of doing business and taxes that apply in California and the United States.

How Prifinance lawyers can assist

Suppose you want to open or buy a company in California. In that case, Prifinance lawyers are ready to apply their years of experience to this task and provide further business support in California and abroad. They have more than 11,000 completed projects in their portfolio. Provide input for launching a new successful project.