Is incorporating the right decision for me? How much does it cost?
One of the most critical factors to consider when establishing a business, is the cost of filing fees. Real estate investors may wish to establish more or less expensive entities depending on their assets.
Sole proprietorships require the lowest filing fees in California. Investors can create a sole proprietorship simply by paying the $26 filing fee. This fee is used to file a fictitious business name statement at the county recorder’s office. Investors can locate the correct county recorder’s office by determining the county in which their entity will be located. Partnerships also require a $26 filing fee. Investors can create a partnership by paying the fee to file a fictitious business name statement at the county recorder’s office where their entity will be located.
In order to create C or S corporations, investors must pay the $100 filing fee to file the Articles of Incorporation with the California Secretary of State. The Articles of Incorporation are documents establishing the existence of such corporations in California. Companies trying to establish C Corps with 35 or fewer shareholders can choose to pay an optional Limited Stock Exemption filing fee. This filing fee ranges from $25 to $300 and allows investors to apply for the limited offering exemption notice (Section 25102(f) Notice Filing – Limited Offering Exemption Notice) at the California Department of Business Oversight. By filing this notice, investors can qualify for the limited stock exemption, which exempts them from registering their C Corps as “securities” under state and federal laws. Investors must pay the $25 filing fee to file a Statement of Information with the Secretary of State. This Statement of Information requires information about the company’s owners, description, location, and other relevant information. It must be filed within 90 days of filing the Articles of Incorporation and must be filed annually during the filing period.
Limited Liability Companies (LLCs) require the most costly filing fees. Investors must first pay the $70 filing fee in order to file the LLC with the California Secretary of State. The Articles of Organization require information about the LLC’s name, owners, description, location, and other relevant information. Investors must then pay the $20 fee to file a Statement of Information with the Secretary of State. The Statement of Information is a document required every two years that updates the LLC’s name, owners, description, location, and other relevant information.
If you are considering forming a business entity, it is highly advised that you retain a knowledgeable and experienced business law attorney. Ms. Eileen Kendall of Kendall Law is a skilled attorney with over 15 years of experience counseling businesses. For a consultation, contact Kendall Law at (310) 619-4941.
Part of Kendall Law’s Best Business Practices blog series
Next time, we’ll explore if incorporating in a different state can save you money.
Have a question or need help with your business? Let us know.