How to Register to Do Business in California

At Harvard Business Services, Inc., one of the most frequently asked questions is: “Am I doing business in California?” While it may seem like an easy question to answer, you would be surprised at how difficult it is for clients to make this determination, especially if it means they’ll be on the hook for more taxes.  That is what it all boils down to—taxation. When qualified as a foreign corporation or LLC doing business in California, the entity is responsible for the minimum $800 Franchise Tax, and possibly income tax, as well.

How exactly do you determine whether or not your company is technically “doing business” in a particular state?  If it’s not already crystal clear, answer “yes” to any of the following key questions, and you can assume you are:

• Is the company making money in the state?
• Do you have a physical presence, nexus, storefront, or brick and mortar in the state?
• Are you hiring employees in the state?
• Do you hold any assets in the state?

The California Secretary of State provides specific guidelines. Per the State of California Franchise Tax Board, a business is considered to be doing business in California in the current year if it meets one of the following qualifications:

• The entity is actively engaging in any transaction in the state for the purpose of financial gain or profit.
• The entity is organized or commercially domiciled in this state. To be commercially domiciled in California means it is the principal place from which the entity’s trade or business is directed or managed.
• The entity’s California sales exceed either the annual threshold amount (annually adjusted for inflation) or 25 percent of total sales. Sales include sales made by an agent or an independent contractor of the entity.
• The entity’s California real property and tangible personal property exceeds either the annual threshold amount (annually adjusted for inflation) or 25 percent of its total real property and tangible personal property.
• The entity’s California compensation exceeds either the annual threshold amount (annually adjusted for inflation) or 25 percent of the total compensation paid by the entity.

If you’re checking any of these boxes, we can help file your “foreign Qualification” with the California Secretary of State.  Give us a call today at 800-345-2677 ext. 6133 or email us at andrew@delawareinc.com.

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Learn more: Foreign Qualification for LLCs and Corporations