When Are You Required To Register A Foriegn Entity With The State Of California

June 22, 2019 by

First, let's clarify what we mean by "foreign" – information technology doesn't involve a flight across the pond or digging out your passport. Your entity is considered a foreign entity past a land other than the one in which information technology's incorporated. As expected, your entity is considered a "domestic" entity by the country in which it's incorporated.

Back to the question. The simple answer is that you must register in every state in which your entity transacts business. It gets tricky when we look at the definition of "transacting business organisation."

Each state has its own definition, but there are sure actions that constitute transacting business in almost every state (at least every state we've researched). These are, in no particular guild:

• Opening an part. Regardless whether you have a physical office, virtual office, or PO box, establishing a business organization address in some other state about always triggers the need to register in that location.
• Having an employee. If you hire an employee in a state other than that in which you're incorporated, chances are yous'll accept to foreign register in that land. At present, don't get cute and try to classify this person as an independent contractor just to avoid the registration requirement. As previously discussed, proper nomenclature of employees and independent contractors involves careful analysis and the misclassification of your employees tin can atomic number 82 to fines and fifty-fifty criminal charges*.
• Sale of goods or services. Some states have an exemption from registration for "occasional" transactions, and others have established a threshold dollar amount in sales you can earn without having to register. This particular cistron is very state-specific, so you'll want to do your homework or enlist the help of an attorney. Remember, if your level of activity triggers the need to register, chances are you lot'll besides accept to pay attention to sales and apply tax requirements in that state.

California appears to have some of the well-nigh sensitive triggers for foreign registration. Fifty-fifty if your (not-California) entity is part-possessor of some other (not-California) entity which does business concern in California, your entity would exist subject to California taxes and the $800/year Franchise Tax.

To make things more difficult, many state laws err on the side of imposing a blanket requirement to strange register if y'all're transacting business in that country, and then prepare along a list of activities not considered transacting business. Often, these include:

• Defending a lawsuit
• Property a company meeting
• Maintaining bank accounts
• Selling through contained contractors
• Owning, "without more than," real holding. (This 1 is tricky, equally it's unclear every bit written whether leasing existent holding – residential or commercial – would found transacting business. Again, this is a state-by-state analysis, then enlist the help of an chaser.)

This is also non an exhaustive list, equally the exemptions vary from state to state.

What happens if you lot practice business in a state without registering? Many states will fine companies for operating inside their borders without having first registered to practise business in that location. California, for example, tin impose a penalty of $2,000 per twelvemonth for failure to file. Incidentally, if you are expanding into California, yous'll kickoff want to consult with a California-licensed lawyer and CPA. The rules at that place are pretty onerous, and the fines pretty steep, so it'south best to do your homework in accelerate.

As an added layer of complexity, once you lot determine that y'all practice, in fact, need to foreign-register your entity in another state, you'll then have to examine whether y'all're besides required to secure local business licenses. Hither in Nevada, if you are a foreign (out-of-land) entity and open an function, yous'll likely have to obtain a concern license from the jurisdiction in which the part is located. This is a municipality- and license category-specific analysis, and then contact the local business organisation license agency for help.

Congratulations on expanding your business! Just make sure you're doing it correctly.

When Are You Required To Register A Foriegn Entity With The State Of California,

Source: https://bongiovilaw.com/2019/06/when-do-i-need-to-register-as-a-foreign-entity/

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