Contact UsMenlo Park Business Attorney Discusses New Rules for Foreign Companies in California
There are some new rules for 2011 in determining whether your foreign corporation or foreign LLC is subject to California state taxation.
A foreign company (foreign corporation or foreign LLC) is a company that is organized in a different state. Many people form their companies outside of California, either because they are engaged in business in multiple states or because they find some advantage in the corporate laws of the other state.
When a company formed in another state does business in California, it is required to register with the California Secretary of State, to pay the California minimum franchise tax, and to pay California income tax (in the case of a corporation) or LLC fees.
However, what is considered “doing business” in California is different for registration and for taxation.
A company is required to register and pay the minimum franchise tax (currently $800 per year) if it is “transacting intrastate business,” meaning entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce.
The income tax rules have changed beginning in tax year 2011. From this point forward, “doing business” in California means doing any of the following:
● Being organized or commercially domiciled in California.
● Having sales (as defined in the taxation code) in California which exceed the lesser of five hundred thousand dollars ($500,000) or 25 percent of the company’s total sales.
● Having real property and tangible personal property in California which exceed the lesser of fifty thousand dollars ($50,000) or 25 percent of the company’s total real property and tangible personal property. The value determinations are further defined in the tax code.
● Paying compensation in California (as defined in the tax code) in excess of the lesser of fifty thousand dollars ($50,000) or 25 percent of the total compensation paid by the company.
The specific dollar amounts will be adjusted in future years.
If you need assistance with a foreign corporation or foreign LLC doing business in California, please call our Menlo Park business attorneys for an appointment today.
Comments (4)
I am incorporating a new business in Nevada. The company will be selling auxiliary lighting products for BMW motorcycles, generally through dealerships, throughout the United States. Since there are several dealerships in California would the fact that I am selling to these dealers subject me to the intrastate rules in California? In reading your June 9, 2011 post it appears that I would not fall under CA requirements.
I can call your office tomorrow if you will be in.
thank you
Joe Rowland
We would need to analyze your particular situation, which we would be happy to do. If you would like to schedule an appointment, please call our office.
Dear Counsel,
My name is Wylie Lachlan and I am inquiring about the availability of your firm in the litigation of a default loan agreement. Please let me know if this is an issue your firm can handle.
Sincerely
Wylie Lachlan
We would be happy to meet with you to discuss your situation. Please call our office to schedule an appointment – 650-321-6796.