Legal Question in Business Law in California

Re: Need to incorporate

I'm unsure what you mean by "security com." Does this mean your proposed corporation will be in the security business, as in guard services? Or are you speaking of securities in the sense of stocks and bonds? Or maybe something entirely different?

The determination you have to make before preparing and filing articles of incorporation is whether the business will be engaging in the practice of a profession, such as medicine, nursing, architecture, dentistry, chiropractic and the like.

If so, most professions will require that you select incorporation as a professional corporation under sections 13400 et seq. of the Corporations Code.

Most other for-profit businesses would incorporate under the general corporation law, Corporations Code section 200 et seq.

Whether you are a "C" corporation or an "S" corporation has little to do with incorporation itself. When the Secretary of State processes your filed articles of incorporation, she will not pay any attention, indeed does not even need to know, whether you will be an "s" or a "c" corporation. Of course, your plan or intention to be one or the other might affect the wording of your articles, but California merely forms corporations, and does not designate them as "s" or "c."

After incorporation, the corporation is a "c" corporation until it files an election with the IRS on Form 2553 to be taxed as an "s" corporation. When that application is accepted, you become an "s" corporation until the corporation loses that status by filing an election to abandon it or by disqualifying itself.

The decision to be an "s" or an "c" corporation should be made early in the corporation's existence, and with the help of its accountant or tax advisor, working with full knowledge of the new corporation's business plan and some idea of the number, citizenship and tax status of the shareholders or expected shareholders.

As a guess, about 90% of newly-formed corporations are qualified to become "s" corporations, and about 80% of those will be better off, or more accurately their shareholders will be better off, electing "s" status -- but by no means all!!

Re: Need to incorporate

The choice of entity analysis for a new company such as a security company is fairly complicated, and involves many factors aside from merely the type of business involved. Please seek competent legal counsel who can advise you for your particular circumstances. -- Linda