Delaware LLC Doing Business in California
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 the state’s strong corporate law structure, forming an LLC in Delaware is often a worthwhile choice.
Why Business Owners Choose Delaware
If you operate your business in California, forming a Delaware LLC means registering in both states. So, why double up on paperwork and costs? While it may not be necessary for a small, local shop, Delaware offers major advantages for startups and scalable businesses.
The primary draw is Delaware’s Court of Chancery, a specialized, judge-only business court with over two centuries of established case law that provides unmatched legal predictability. Additionally, Delaware offers enhanced privacy, unlike California, which requires public disclosure of LLC owners. Finally, venture capitalists and angel investors consider Delaware the legal gold standard. Forming your LLC there signals to sophisticated investors that your legal foundation is built on familiar, highly respected ground.
Don’t let state borders limit your business!
Secure your Foreign Qualification today.
Qualify my company
How to Register a Delaware LLC in California
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 operating in California or any other U.S. state, failure to adhere to local compliance regulations may put the protection of your company at risk.
Here is a quick instructional guide to complete the process:
- Secure a California Registered Agent
- Obtain a Certificate of Good Standing from Delaware
- Check Your LLC’s Name Availability
- File Registration Forms with the California Secretary of State
- Pay the California Franchise Tax
California or Delaware Registered Agent?
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. A Delaware LLC doing business in California will generally need a Registered Agent in both states. The Delaware Registered Agent is required to keep the LLC active and in good standing in Delaware, where the company was originally formed. The California Registered Agent is required because the company is now registering to do business in California as a foreign LLC.
Some people elect to be their own Registered Agent while others enlist the support of their Delaware Registered Agent. Often, the Delaware Registered Agent will also provide the service in California. The California Registered Agent will not need to sign the filing for a Delaware LLC in California.
California Tax Obligations for a Delaware LLC
A Delaware LLC doing business in California may owe taxes and fees in both states. Registering as a foreign LLC in California does not replace the company’s Delaware obligations. Instead, the LLC must continue maintaining its Delaware status while also meeting California’s tax requirements.
In California, LLCs are generally subject to the state’s annual $800 LLC tax, paid to the California Franchise Tax Board (FTB). California may also charge an additional LLC fee based on the company’s total California income.
The LLC may also need to file California tax returns and report California-source income, depending on its tax classification and business activity. Because California tax rules can be complex, especially for companies with owners or operations in multiple states, business owners should speak with a tax professional before registering or operating in California.
Converting a California LLC to a Delaware LLC
A statutory conversion is a legal process that allows a business entity to change its home state without having to close down the original company and start a brand new one from scratch. Instead of the messy administrative process of dissolving your current business, forming a new entity, and manually transferring over all your assets and liabilities, a statutory conversion allows the business to legally swap into the new entity. The converted business is considered a direct continuation of the original one.
If you need help moving your company's legal home from one state to another, such as converting a California LLC into a Delaware LLC, make sure to contact Harvard Business Services, Inc. Our team of professionals can help you with the transition and act as your registered agent in any state.
FAQs
Does my Delaware LLC doing business in California need a California registered agent?
Yes. If your Delaware LLC registers to do business in California, it will need an agent in California. This is separate from the company’s Delaware Registered Agent. The California agent gives the state and courts a reliable in-state contact for legal notices and official documents. California’s foreign LLC registration form requires agent information as part of the filing.
Does registering in California create a new LLC?
No. Registering a Delaware LLC in California does not create a new California LLC. Instead, it gives the existing Delaware LLC authority to do business in California as a foreign LLC. The company remains a Delaware LLC and must continue meeting Delaware requirements, while also following California’s tax and reporting rules.
Can I live in California and own a Delaware LLC?
Yes. You can live in California and own a Delaware LLC. Delaware does not require LLC owners to live in Delaware. However, if the LLC is operated from California or otherwise does business there, it may need to register in California and meet California tax and reporting requirements. Registering in California does not replace the LLC’s Delaware obligations.
Form a Delaware LLC
If you're planning on forming an LLC in California, first consider doing business in California as a Delaware LLC. You can learn more about Delaware Foreign LLC Registration on our website. Contact our team today to learn how to register a Delaware LLC in California.
Don’t let state borders limit your business!
Secure your Foreign Qualification today.
Qualify my company*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.
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There are 9 comments left for Delaware LLC Doing Business in California
Mario said: Tuesday, July 26, 2022Can I, as non US resident form an LLC in Delaware for invoicing international sales commisions to a company registered in California? Thank you very much.
HBS Staff replied: Wednesday, July 27, 2022Hell Mario,
Thank you for your email. Yes, anyone anywhere in the world can form a Delaware company and operate lawful business activities. We would be happy to further discuss this with you.
S said: Wednesday, December 9, 2020If 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, 2020Unfortunately, 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, 2019We 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, 2019Jennifer, 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, 2019Can I register first in CA, and then register in Delaware?
HBS Staff replied: Tuesday, May 28, 2019Gary, 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, 2018If 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, 2018Sheela - 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.
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