If you're a Delaware LLC doing business in California, your company is considered domestic to the state of Delaware and foreign to California. To take advantage of strong corporate law structure, Delaware is by far the most popular domestic choice.
If your business will have a physical presence by operating, hiring employees, banking or even holding an asset in California, you will typically need to qualify the business to operate there through a process known as Foreign Qualification.
The Foreign Qualification process enables a company to transact business in California. If you're a Delaware LLC doing business in another state (including California), failure to adhere to local compliance regulations may put the protection of your company at risk.
You will need a California limited liability company application for registration form, your approved Certificate of Incorporation from Delaware and a Certificate of Good Standing from Delaware. The Certificate of Good Standing can be no more than six months old.
California will also require you to have a Registered Agent in California. A Registered Agent is your liaison with the state, and provides a physical address within the state for the purpose of receiving any legal documents or service of process from the state.
Some people elect to be their own Registered Agent while others enlist the support of their Delaware Registered Agent. Often, the Delaware Registered Aagent will also provide the service in California. The California Registered Agent will not need to sign the filing.
California will require a person with the authority to sign under the laws of the state of organization of the LLC to sign the application. Keep in mind that they will require this person’s name and address.
All information provided to California will be made public; however, there is no publication requirement unless specifically required by the county in which your Registered Agent resides.
Once registered in California, your company will have reporting requirements. The initial report is due within 90 days of your filing, and the biennial reports are due on the last day of the month in which you filed.
The cost of this filing is $20 initially and is the same for the biennial report. Please keep in mind that California has a late fee of $250 if this requirement is not met on time. California also has a well-known minimum franchise tax of $800/year.
One way that California varies from other states is that a foreign LLC may not render professional services in the state of California. California will often advise you to contact your licensing authority before filing with the Secretary of State if your business is required to be licensed, registered or certified.
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.
There are 8 comments left for Delaware LLC Doing Business in CaliforniaS said: Wednesday, December 9, 2020
If my LLC is doing business with a Delaware Corporation not llc doing business in California, do I have to pay taxes to California like I would if I were doing business with a California llc or corporation?HBS Staff replied: Thursday, December 10, 2020
Unfortunately, we're not sure exactly what you're asking here. Typically, you will have to obtain foreign qualification in any state in which your own company is doing business. If you are unsure if your business activities qualify as doing business, please check with the California Department of State or consult an attorney or accountant.Jennifer Y. Martelino said: Friday, October 18, 2019
We are a Delaware registered LLC and the nature of our business is record reform services. We have a client in CA. Do we need to pay CA sales tax? I researched and found out that services are not taxable in CA. Does this apply to us given that we are out-of-state Delaware registered?HBS Staff replied: Monday, October 21, 2019
Jennifer, this is a question that an accountant would have to answer for you as we are unable to comment on your specific tax obligations. Sorry we can't be of more assistance!Gary said: Sunday, May 26, 2019
Can I register first in CA, and then register in Delaware?HBS Staff replied: Tuesday, May 28, 2019
Gary, you can register your company to do business in as many states as necessary. For example, if you form your LLC in Delaware you will be able to do business in this state. If you then wish to add California and any other states, you typically will apply for Foreign Qualification in those states. Please contact us via email, phone, or live chat if you have additional questions and we will be happy to assist.Sheela Ambre said: Thursday, October 18, 2018
If ayway I have to register my LLC in CA due real estate being in CA, why would I incorporate my LLC in Delaware and pay extra RE fee, annual report fee?HBS Staff replied: Friday, October 19, 2018
Sheela - great question! Many companies choose Delaware as their home state, even if their primary place of business is elsewhere, due its business-friendly reputation. Specifically, Delaware's corporate law structure is favorable for businesses and investors are more likely to invest in Delaware companies. Read more about the Benefits of Incorporating in Delaware.George Cornell said: Wednesday, October 17, 2018
If you are doing anything in California including internet sales the State will make you pay the franchise tax. Simple as that.
1 | 2