Doing Business in CA? Be Sure to Register
Sometimes California-based entrepreneurs think that they can avoid CA registration fees and taxes by forming their business entities in another state. Usually, that belief is incorrect: If the entity is doing business in CA, then it must register with the CA Secretary of State, even if the entity was formed elsewhere.
So what constitutes “doing business” in CA? The term used in the Corporations Code is to “transact intrastate business”, which is defined as “entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce” (Section 191(a) with respect to corporations, Section 17001(ap) with respect to limited liability companies).
Any foreign (non-CA) startup that is headquartered in CA – even if it is operating a website on servers located thousands of miles away – is likely to enter into “repeated and successive transactions” with suppliers, customers and other businesses that are located in the state and, thus, will need to register in CA.
Fortunately, the registration process is reasonably straightforward and not too expensive. The correct Secretary of State form must be completed and submitted with a certificate of good standing from the state where the entity was formed and the applicable filing fee.
Related posts:
- Why (not) form an LLC in Nevada?
- Why (not) Incorporate in Delaware?
- When “Doing Business” isn’t “Doing Business”
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Dana Shultz is a business-savvy lawyer located in Northern California's San Francisco Bay Area (in the East Bay, near Oakland) who has in-depth knowledge of law, business, technology, and the needs of startup and early-stage companies.
Dana:
Wondering if our OR nonprofit corporation needs to file as a foreign corporation with the CA Secy of State when one of our employees moves to CA and will have a home office. He would not be doing anymore or less CA activities than he does now. He is moving for personal reasons not because our corporation wants to have a CA presence.
@Bev
As noted in the post, the test is whether, on behalf of your corporation, he will be “entering into repeated and successive transactions of its business in this state”. I cannot answer that question, but you should be able to.