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Foreign LLC In California
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How To Start A Foreign LLC In California
A California Foreign LLC refers to a business that is established in a state other than California. If you intend to conduct business in California, your company must register within the state. In this context, “foreign” does not imply another country, but rather another state within the United States. Conversely, a business that is formed in the same state where it operates is known as a “domestic LLC.” Prior to engaging in intrastate business in California, it is necessary for your company to register with the California Secretary of State. The term “transacting intrastate business” encompasses engaging in repeated and successive transactions within this state, excluding interstate or foreign commerce.
Under California’s LLC Act, foreign LLCs are required to register with the state if they conduct business within its borders. When a company establishes a physical presence in California, it must also collect sales tax on its sales to residents of the state. If your company deals with financial information, consumer data, or engages in the sale of consumer data, it is important to ensure compliance with California privacy laws and corporate registration requirements. If you are considering establishing a foreign LLC in California, we encourage you to reach out to our experienced Los Angeles LLC lawyer at the Law Offices of Eric J. Proos, PC. Our team can provide further guidance and assistance throughout the entire process.
How to Register a Foreign LLC in California
Obtain a Certificate of Good Standing
In order to register a foreign LLC in California, you will need to obtain a Certificate of Good Standing from your home state. This Certificate, which must be current and no older than six months, serves as proof that your LLC is in compliance with all state requirements. To obtain the Certificate, you can visit your local Secretary of State’s office and request it. It is an important document that demonstrates the legitimacy and good standing of your LLC, allowing you to conduct business smoothly in California.
Determine Your LLC Name for Use in California
While most LLC names are generally acceptable in California, it is worth noting that there is a possibility that your company’s name may not comply with California law. In such cases, it will be necessary for you to choose an alternative name that conforms to the regulations specific to California. Although it is not mandatory to reserve a name when submitting a Foreign LLC Registration, you may consider applying for a name reservation with the Secretary of State. Keep in mind that there is a fee of $10 associated with name reservations.
Submit Application to Register Foreign LLC
To register your LLC from another state, you need to submit an Application to Register Foreign LLC. The filing fee is currently $100. Along with this filing, you must include your current Certificate of Good Standing. Once your filing is processed, the Secretary of State will provide a plain copy of your filed document for free. Certified copies are available upon request and payment of a $5 fee.
File Statement of Information
Every California LLC is required to submit a Statement of Information within 90 days of registration. Following the initial filing, foreign LLCs must provide additional Statements of Information every two years. The filing fee for each submission is $20. The convenience of online filing makes the process quick and efficient.
When You Have to Register to Do Business in California
To conduct repeated and consecutive transactions in California, businesses from outside the state must register as a foreign entity with the state government. This requirement applies to activities conducted within California, excluding those related to foreign or interstate commerce. (Cal. Corp. Code § 191 (2023); Cal. Corp. Code § 17708.03 (2023).) Two common types of foreign businesses that California recognizes are:
- Foreign corporations, and
- Foreign LLCs.
Defining transactions as repeated and consecutive can be challenging. According to the Franchise Tax Board (FTB), companies are deemed to be “doing business” if they meet either of the following criteria:
- Engaging in any transaction for the purpose of financial gain within California
- Companies that are organized or have their headquarters in California, or
- If your sales, property, or payroll exceed specific thresholds
For detailed information, including qualifying sales, property, and payroll amounts, please refer to the “Doing Business in California” section on the FTB website. It’s important to note that the activities considered “doing business” by the FTB for tax purposes may differ from those for foreign registration. If you require legal advice on whether your business activities necessitate registering as a foreign LLC in California, we recommend consulting with our skilled business formation attorney. We will provide guidance on your filing obligations and can assist with the necessary registration process.
When You Don’t Have to Register to Do Business in California
California’s Revised Uniform LLC Act and General Corporation Law outline a set of activities that are not considered transacting intrastate business. As a result, these activities do not require registration, making it unnecessary for companies engaging solely in these activities in California to register as a foreign business. These excluded activities, which apply to both LLCs and corporations, include:
- Defending or resolving a lawsuit or claim
- Managing internal company affairs such as holding meetings for members, managers, shareholders, or the board
- Maintaining a bank account
- Having an office, agency, or personnel in the state to handle the company’s securities
- Selling products or services through independent contractors
- Soliciting or obtaining orders that require acceptance outside the state before becoming contracts
- Creating or acquiring debt, evidence of debt, mortgages, or security interests in real or personal property
- Securing or collecting debts
- Conducting a one-time transaction that is completed within 180 days and is not part of a series of similar transactions
- Engaging in business activities in interstate commerce.
In California, there are certain activities and business statuses that do not fall under the category of transacting intrastate business. For instance, a foreign business is not required to register in California solely based on the fact that its subsidiary conducts business in the state, or based on its status as any of the following:
- A shareholder of a domestic corporation
- A shareholder of a foreign corporation transacting intrastate business
- A limited partner of a domestic limited partnership
- A limited partner of a foreign limited partnership transacting intrastate business
- A member or manager of a domestic LLC
- A member or manager of a foreign LLC transacting intrastate business
Frequently Asked Questions
What Is The Cost Of Registering A Foreign LLC in California?
When submitting an application to the state, the base fee is $70. If the application is personally delivered, there will be an additional fee of $15. For expedited processing within 24 hours or the same day, an additional fee of $350 or $750 respectively applies. Once your application is submitted, your LLC will receive a certificate of qualification by mail. If you desire a copy for your records, you may include up to two copies of your application. The state will then return these copies to you.
What Are The Fees For Foreign LLCs In California?
The state of California requires LLCs to pay a minimum yearly tax of $800, known as the Franchise Tax. All LLCs must file a tax return with the California Franchise Tax Board and fulfill this tax obligation if they are conducting business in the state, as mentioned earlier.
Failure to file this tax return by a foreign LLC doing business in California may result in a penalty of $2,000 for each taxable year in which the return was not filed or the tax was not paid. However, this penalty will only be imposed if the LLC receives a letter requesting the return and fails to comply within 60 days. Additionally, an LLC that neglects to file its required tax return and pay taxes may have contracts with other parties voided.
It is important to note that this requirement also applies to non-residents of California who have ownership interests in an LLC. If the income distributed to them originates from business transactions within the state, they may still be liable for California LLC tax. The California Franchise Tax Board has recently taken significant measures to enforce these tax requirements, with a particular focus on LLCs owned by non-residents.
What Info is on the Registration Application (Form LLC-5)?
The following information is listed on the Application to Register Foreign LLC (Form LLC-5):
- Name of Your LLC (as it is found on your Certificate of Good Standing)
- Alternate Name for Use in California (if applicable)
- Date of Formation
- Physical Address of Principal Office
- Physical Address of California Office (if applicable)
- Mailing Address of Principal Office
- California Registered Agent Information
- Signature of Authorized Individual
How Are Foreign LLCs In California Taxed?
Foreign LLCs in California are taxed the same as any other LLC in the state. Your LLC, whether foreign or domestic, is considered a pass-through entity by default. This means that the LLC itself doesn’t pay taxes. Instead, the LLC’s members are required to report the profits as income on their personal tax returns. Your LLC may also file with the IRS to be taxed as a corporation instead.
Need Help With A Foreign LLC In California? We Can Help
Even after getting approval from the Secretary of State for your foreign LLC, your company’s obligations continue. Don’t forget about California’s tax requirements for foreign LLCs. You need to remit an annual franchise tax of $800. Expanding your operations outside your home state presents exciting opportunities, but it’s crucial to comply with the laws of the state where you wish to operate. This ensures your LLC’s transactions are legal and minimizes future issues. For a better understanding of the process, consult with our reliable business lawyer in Los Angeles. At the Law Offices of Eric J. Proos, PC, we can assist you and simplify the process. Contact us now to learn how we can help with your LLC’s foreign qualification in California.