To prepare a valid articles of incorporation, you must include all the provisions required by California Corporations Code section 202. These provisions are:

1. A name,
2. A statement of purpose,
3. An agent for service of process,
4. A share structure including the authorized number of shares, and
5. A signature by an Incorporator.

Each of these requirements is explained below. By using our to prepare your articles of incorporation, you will be asked about all these provisions so you don't make a mistake.

In addition to the foregoing mandatory provisions, you may include optional provisions as provided in California Corporations Code section 204. These are discussed more below.

The articles of incorporation must state a name for the corporation. When choosing a name, you should keep the following in mind:

A. The California Secretary of State will NOT file an Articles of Incorporation if:

1. the name of the corporation is the same as or is too similar to the name of an existing corporation on file with the Secretary of State.
2. certain words are contained in the name of the corporation. The following list of words are generally NOT allowed:
         » Olympic, Olympiad, or Citius Altius Fortius
         » Bank, Trust, Trustee or related words
         » Cooperative, or any abbreviation thereof or any related word
         » National, federal, United States, reserve, deposit insurance,
         » Words referring to credit unions

B. You do not generally need to end the corporate name in a specific way, except in the following two circumstances:

1. When the corporation is to be a statutory close corporation, or
2. When the name of a corporation is a personal name (you can also use the word "Company" in this case).

If either of the foregoing two circumstances apply, then the name of the corporation must end with one of the following words or an abbreviation thereof: "Corporation," "Incorporated," or "Limited" (abbreviations are Corp., Inc., and Ltd.

C. If the corporation is to do business in another state, you should first check with that State to make sure your name is not already in use there and that you will be able to do business there with your chosen name (it's a good idea to do this even if you think the corporation will file a D.B.A. and use a different name in that other state).

D. You should check to make sure your chosen name for the corporation is not trademarked by another company by checking with the federal patent and trademark office, as well as telephone books, trade publications, and even the copyright office.

An agent for service of process is a person designated by the corporation to accept the delivery of legal papers for a lawsuit. Anyone residing in California can serve as the agent for service of process for a California corporation. A person serving as the agent needs to provide his/her complete address in California.

The agent initially designated in the Articles of Incorporation may be changed at a later time. This can be done by filing an updated informational statement with the Secretary of State. In either case, approval from a proposed agent should be obtained prior to designation.

Finally, a corporation that has complied with Corporations Code section 1505 can also act as an agent for service of process. 1StopLegalForms, Inc. may act as your corporation's agent for service of process in California.

What Are Shares?
In a corporation, every unit of ownership is known as a "share." Every corporation must state how many total shares it will have. These shares are called "authorized" shares. When shares are later sold/transferred to shareholders, they are called "issued" shares. A corporation must keep track of its issued shares. Usually, this is done using a stock ledger.

How Many Shares?
A corporation can have any number of authorized shares. However, it is generally not a good idea to have too few shares, or too many shares. Typically, most corporations start with between 1000 and 10,000,000 shares, depending on their anticipated needs.

Generally, it is a good idea to authorize more shares than will be issued. However, if the corporation will do business in another state (other than California), too many shares can create a very large filing fee or franchise tax, because some states charge their fees based on the number of authorized shares. If you know that your corporation will only do business in California, having too many shares will not increase your fees or taxes.

In considering the corporation's anticipated needs for purposes of choosing the number of shares to authorize, the people responsible for forming the corporation need to analyze factors such as the following:

1. The number of intended shareholders
2. The percentage of the company each intended shareholder will own
3. The need to raise money by selling stock
4. How soon it will need to raise money by selling stock
5. The need to offer stock options to prospective employees
6. In what states or territories the corporation will do business

This is not an exhaustive list. There are usually additional and different factors to analyze for a particular corporation and its intended business needs. If you are unsure about how many shares your corporation should authorize, you should consult an attorney.

NOTE: Shares are organized by "classes." The most simple way to organize a corporation is to have only one (1) class of shares. Many small businesses that incorporate only have one (1) class of shares (usually referred to as common shares or common stock). With this organization, every share has equal rights, and corporate governance is easier. IN FACT, IF THE CORPORATION WILL MAKE AN S ELECTION FOR TAX PURPOSES, THIS METHOD OF ORGANIZATION IS REQUIRED.

USING THIS WEBSITE, YOU CAN CREATE A CORPORATION WITH ONLY ONE CLASS OF SHARES. IF YOU WANT A MORE COMPLICATED SHARE STRUCTURE, DO NOT USE THIS WEBSITE.

Corporations Code section 204 sets forth optional provisions that may be included in an articles of incorporation. Although these provisions are not required, some of them MUST be included in the articles of incorporation for them to be effective. For example, a corporation may, if desired, have a limited existence. However, for the corporation's existence to be limited to a certain duration, a provision making such limitation must be included in the articles of incorporation. Otherwise, a corporation's existence continues until it is dissolved by proper methods.

Corporation Code section 204(a) sets forth all the optional provision that, unless included in the Articles, will not be effective. There are a total of 11 such provisions. The is programmed to include only 2 of these provisions. These 2 provisions are explained below:

LIMITATION OF DIRECTOR LIABILITY
Directors have certain duties to the corporations for which they serve. If they breach their duties, they are liable to the corporation. However, the Articles of Incorporation may contain a provision that eliminates or limits this liability.

Why would a director want this? Such a provision protects directors and therefore is very important and useful for directors. A person who intends to serve as a director is likely to want such a provision since he/she will benefit from it.

Why would a corporation want this? One reason may be to prevent scaring off desired personnel. Corporate liability intimidates many people. A corporation seeking to recruit someone particular onto the board of directors may have an easier time doing so if director liability is limited. This may not mean much if your corporation consists only of you and a couple of friends. However, as your corporation grows, this could become more important.

Furthermore, it is important to understand that such a provision does not eliminate or limit liability for acts of intentional misconduct, absence of good faith, where a director derives an improper personal benefit, and other certain situations where the interests of fairness would not be served. The list of exceptions is found in Corporations Code section 204(a)(10). Hence, by having such a provision, the corporation is not giving a director free reign to act as desired.

PLEASE KEEP IN MIND, that this provision does not eliminate or limit liability of officers for any act or omission as an officer, notwithstanding that the officer is also a director or that his or her actions, if negligent or improper, have been ratified by the directors.

INDEMNIFICATION OF AGENTS
To indemnify someone means to secure him/her against a future loss or damage. To "secure" against a future loss or damage usually means paying money for the loss or damage, if and when it occurs. Indemnification is usually limited to certain circumstances.

For example, if a corporation indemnifies its agents against negligent performance of duties, and that situation later occurs and causes damage to the agent, the corporation will pay for any loss or damage suffered by the agent as a result of that situation.

California Corporations Code section 317 authorizes a corporation to indemnify agents sued for carrying out activities on its behalf. However, depending on the circumstances, indemnification may be mandatory or prohibited.

With respect to the Articles of Incorporation, a provision may be included that allows a corporation to indemnify agents in excess of what is allowed under Section 317, but only for breach of duty to the corporation and its stockholders. This type of indemnification would NOT cover any acts that a director would be liable for under California Corporations Code section 204(a)(10) (discussed above) or for circumstances in which indemnity is expressly prohibited by California Corporations Code section 317.

Please note that unlike the "Limitation of Director Liability" provision above that applies only to directors, the indemnification provision applies to "agents" of a corporation. Agent is defined in California Corporations Code section 317 as: any person who is or was a director, officer, employee or other agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or was a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor corporation of the corporation or of another enterprise at the request of the predecessor corporation.

Why would an agent want this? Such a provision protects agents and therefore is very important and useful for agents (such as CEO's). A person who intends to serve as an officer, employee, or other agent is likely to want such a provision since he/she will benefit from it.

Why would a corporation want this? One reason may be to prevent scaring off desired personnel. Corporate liability intimidates many people. A corporation seeking to recruit a talented officer (such as a CEO) will probably have difficulty doing so unless agent liability is limited. This may not mean much if your corporation consists only of you and a couple of friends. However, as your corporation grows, this could become more important.

You can only form basic corporations formed under the General Corporation Law. You CANNOT form

1. a professional corporation,
2. a nonprofit corporation,
3. a corporation for a specialized purpose, or
4. a corporation with more than a single class of shares.

Furthermore, please read the "Things To Consider" section below to learn about other restrictions on the types of corporations you can form.

1. The Articles of Incorporation prepared via the cannot be used to create certain corporations, such as banks, trusts, insurance companies, statutory close corporations, professional corporations, mutual water companies, and other special purpose corporations.

2. The Articles of Incorporation prepared via the contains the general purpose statement set forth in Corporations Code section 202. Do not use this website if your corporation requires a different statement of purpose.

3. The Articles of Incorporation prepared via the only contains the minimum mandatory provisions, with only one class of shares, with a choice of adding only 2 optional provisions. If you want other optional provisions in your Articles of Incorporation, or if you want additional classes of shares, you should not use this website.

4. Another way to prepare the Articles of Incorporation is to have all the initial directors of the corporation named in the Articles of Incorporation. Instead of an incorporator's signature, this method requires the original notarized signatures of all the directors, which can be very difficult to obtain. The is not programmed to prepare Articles of Incorporation by this method. If you want to prepare the Articles of Incorporation by naming the initial directors and not using an incorporator, you should NOT use this website.