California Foreign LLC

What Is a Foreign LLC?

A foreign LLC is an LLC from another state that operates in California. Most foreign LLCs are based in the United States and they’re called foreign due to being from a different state, so it’s not necessarily a company from another country or territory.

Every state has different rules for how these LLCs can operate within their state, so California’s laws might differ from laws in a state like Texas or New York. Therefore, you need to learn about the laws and filing requirements in each state before you consider moving your LLC there.

Thankfully, most states have similar rules and it’s usually not hard to operate an LLC in a foreign state if you know what to do.

Does California Recognize Foreign LLCs?

Yes, California recognizes foreign LLCs. California allows people from anywhere in the United States to form LLCs in the state. As long as you meet the filing requirements, pay your taxes, and remain in good standing, you shouldn’t have any issues with your foreign LLC in California.

That said, the state defines a foreign LLC as a company that’s from another state, so it’s usually a label that US companies receive. While it’s not unheard of for a business located in a different country to have an LLC in California, it’s more rare.

It’s also important to note that California recognizes most types of foreign entries. This means that you can move operations to California as a partnership, corporation, or sole proprietorship.

How Foreign LLCs are Taxed in California

Foreign LLCs in California have to pay taxes on income generated in California. Therefore, foreign LLCs are taxed in California based on how much revenue they generate along with the franchise tax. This can either be $0 or $800 depending on when you move your operations to California and how much profit you make or lose.

Most LLCs will have to pay the franchise tax if they turn a profit in the state. If you have unique permits or other types of business licenses, you might also have to pay taxes on them as well.

While your foreign LLC will have to pay taxes in California, you also have to pay taxes in the state where your company is formed. Keep this in mind during tax season to avoid any fines or penalties.

How Much Does It Cost to Operate a Foreign LLC in California?

Operating a foreign LLC can be inexpensive or expensive depending on the type of LLC and how fast you need to get started.

To start, you’ll have to pay at least $70 for the application fee. However, you can pay $350 for 24-hour filing if you need to register your business faster. You can also pay $750 to have your information filed on the same day, so it can cost $70 to $820 to file your application.

Taxes and other costs also need to be factored into the operating cost as well as your income and expenses. For this reason, it usually costs more than $1,000 per year to run a foreign LLC in California.

You can often mitigate some of these costs with good accounting practices. So, make sure you work with a professional if you’re interested in saving money on your foreign LLC in California.

Do I Have to Register My Foreign LLC to Do Business in California? All About Registration

Typically, you need to register your business in California to do business in the state, even if your foreign LLC is registered in a different state.

That said, you don’t always have to register your business. In fact, you have to meet specific requirements before you can become eligible to even register a business in California. These requirements are sometimes loosely interpreted by state law, so it’s important to check with an accountant before you go through the registration process.

When it comes to what’s required, the Franchise Tax Board has an outline of what it considers as doing business. Examples include consecutive transactions in California, transactions for financial gains, and sales, payroll, or property over a certain amount.

So, you don’t always need to register your business in California if you only have a handful of transactions. For this reason, it makes sense to determine how often you plan on conducting any business in California before registering your company.

Always consider legal advice when moving a foreign LLC to California to determine if you even have to start the process. This can help you avoid fines, penalties, and tax problems.

When You Don’t Have to Register to Do Business in California

In some cases, you can do business in California without registering your foreign LLC or business in the state. California created a Revised Uniform LLC Act and a General Corporation Law to deal with companies that are doing business activities that are not considered interstate business.

Some examples of when you don’t have to register a business in California include:

• Handling a lawsuit or a claim against your company
• Holding shareholder meetings or dealing with things that happen inside the company – company parties and some business meetings can count
• Opening a bank account in California
• Having an office or agency in California that handles securities on behalf of the company
• Collecting debts owed to a company from someone in the state or another company in California
• Isolated transactions
• Selling through 1099s or independent contractors
• Creating debts or other liabilities

These are only a few examples of when you don’t have to register your business in California. Depending on the type of business you have and how often you plan on doing business, you might be able to avoid registering your business. Still, you have to pay taxes on your transactions, even if the income is reported in your home state instead.

What Are the Penalties for Not Registering Your Foreign Business in California?

It’s in your best interest to register your foreign business in California. Failing to do so can result in many problems for your company, including costly fines and other financial restrictions. In fact, you’ll have to pay a fine for each day your company operates without the proper registration.

What’s more, you can get a misdemeanor charge if you continue to operate without the proper registration in California.

Another consequence you need to be aware of is the inability to file lawsuits on your company’s behalf. That means if there are altercations due to failed payments or something of that nature you won’t be able to file a lawsuit against the guilty party.

These penalties can only be avoided by remaining compliant and registering your business. Make sure you follow the steps we cover below to ensure that your foreign LLC is operating properly.

How to Operate a Business Under  California Foreign LLC Requirements

Operating a foreign LLC in California isn’t challenging and the state allows you to operate a wide range of LLC options. In fact, you can even operate LLC types that aren’t available in California. For example, you can operate an anonymous LLC or series LLC in California even though starting that type of LLC isn’t allowed in California.

While it can be a hassle to start a business in another state and move to California, it’s often worth it due to California’s great market. Learn about the steps you can take to operate a foreign LLC in California.

Step 1: Create a Business Plan

Haven’t started a business yet? It’s time to get started with a business plan. These plans are designed to help you keep your company organized. Your business plan needs to include important information about your company, including:

• Executive summary
• Marketing plan
• Target market
• The structure of the company; in this case an LLC
• Information about the owner of the company, including contact information and your primary address
• How you plan on expanding if you plan to do so

Along with this information you should also consider additional details about your company if you have a complicated business formula or intricate niche.

Business plans are also essential if you want to have any semblance of organization. Therefore, it’s not something you should rush through just to get it done. The Small Business Association has some information on its website that can help you better understand what needs to go into a business plan.

Step 2: Choose a Business Name

The next step is to make your company. You’ll want to check that the name is available in the state you plan on creating it. Most states have a portal that allows you to look for business names in a database.

Once you know that the name is available you can begin the process of reserving that name. Since you’ll be moving your operation to California, you should also check to see if the name is available in California as well. Otherwise, you might be forced to use an alternative name, which means more decisions and paperwork.

If you have the name you like, it’s a good idea to also reserve any online property associated with the name. This includes domain names, social media accounts, and anything else that’s on the internet. The last thing you want is someone seeing your success, taking these names, and holding them hostage until you pay for them.

You should also reserve the .com, .org, and other variations of your domain to ensure that these properties don’t get taken either.

Step 3: Certificate of Good Standing

After all this, you may be asking yourself “How do I qualify a foreign LLC to do business in California?” Once you’ve got the basics of your business down, the most important step is to file a Certificate of Good Standing.

These certificates help California learn about whether or not you’re compliant in your home state. Ultimately, California will want to see that you’re up-to-date on any fees, permits, and other filing requirements in your home state.

If you’re not up-to-date it can make it difficult to move your business into California until you ensure that everything is back in good standing. You can request this document from your business’ home state and have them send it to California or you can do so once you have the document.

That said, always make sure your company is compliant before moving to California. Otherwise, the state might see it as a move to avoid fees and penalties in your home state.

Step 4: Register Your Foreign LLC in California

The next part of the process is registration. You need to register your foreign LLC in California to make sure you’re cleared to do business in the state. Failing to do so can result in penalties, fines, and even legal problems.

The good news is that you can register your foreign LLC with the California Secretary of State by filling out the Application to Register a Foreign LLC in California. This form is also referred to as the LLC-5 form by the California Secretary of State and it’s available on their website or you can obtain a copy in person.

This application is straightforward but does require information pertaining to you and the company you own. You’ll have to provide the following information:

• The name of the LLC as its registered in its home state
• Whether or not you want to operate under a different name in California
• The date your LLC was formed
• A Certificate of Good Standing from your home state
• File your Statement of Information

Aside from the information you need to include you also have to pay the necessary fees in California and file your paperwork on time. The Statement of Information needs to be filed within 90 days of your registration and the application fee will run you at least $70. If you need to register faster you can pay a rush fee.

Step 5: Apply for a Business License

Another thing you’ll need in California is a business license. These licenses are important because they allow the state to collect tax revenue from your business. You’ll need one of these licenses in every county you plan on doing business in because each municipality is unique in California.

Licenses in California aren’t expensive but they can cost extra. Plus, you may need unique zoning permits, food permits, or health permits.

If you’re a foreign professional, you’ll also need additional licenses in California. For example, accountants and lawyers will need another license due to their profession. Make sure you check the licensing requirements that you’ll need for your foreign California LLC before you decide to move some of your operations to California.

Foreign LLC in California FAQ

Have more questions about foreign LLCs in California? We have answers to the most common questions below.

Can a Foreigner Own an LLC in California?

Yes, a foreigner can have an LLC in California. There are no restrictions on people who can own an LLC in California, whether foreign or out of the state or out of the country. For example, many Chinese, European, and South American companies have locations in California.

As long as the company pays the necessary fees, remains compliant, and doesn’t break any laws in California, California welcomes foreign business. That said, foreign companies will have to pay taxes on income in California, so check with your state or country to see how this will work.

Which US LLC Is Best for Foreigners?

The best US state for an LLC depends on what you’re looking for out of an LLC and the type of LLC that you’re looking to start. For example, if you’re looking for the most privacy your best option is Delaware or Wyoming due to the ability to start an anonymous LLC.

However, if you’re concerned about taxes you might want to choose a state with no income tax like Nevada, which is also flexible with annual reporting.

Ultimately, it comes down to what you’re looking to get out of your business. California can also be a great choice for a foreign LLC due to the state’s massive gross domestic product (GDP). This is something business owners can tap into with the right products and marketing.

How Do I Avoid $800 Tax in California LLC?

Almost every LLC needs to pay the $800 minimum tax in California. While there were exceptions in 2021, 2022, and 2023 to promote new business growth, this is no longer the case.

So, a foreign LLC will also have to pay this tax unless it meets the criteria for an exemption. For an exemption, you’ll have to report a loss of income or not make any money in California in the given tax year.

Another way to avoid paying the $800 tax in California is to file your documents and get started 15 days before the end of a calendar year. You’ll have to pay the tax next year but you can at least avoid it for 15 days. The last way to avoid the tax is to not move an LLC to California. Instead, choose a different legal entity like a sole proprietorship.

Does California Recognize Foreign Corporations?

Yes, California recognizes foreign corporations. Just like an LLC, you can establish a foreign corporation in the state if you’re headquartered somewhere else in the US.

You’ll have to do the necessary paperwork and pay the franchise tax but you can get started with an application fee for as little as $70. For the best results, work with a professional when moving your foreign corporation to California. It can prevent legal problems and fees from piling up.

California also recommends multiple types of foreign corporations. This means that you can use a professional corporation (PC) and other corporation options if you want to expand to California. Check with the Secretary of State to see what requirements you need for a foreign corporation.

Does California Recognize Limited Liability Partnerships?

Yes, California recognizes limited liability partnerships (LLP). Ultimately, the state recognizes most types of legal entities as long as you remain compliant. If you want to have a professional partnership or any other type of partnership that limits liability, you can form one in another state and move it to California.

Check with the Secretary of State’s website to see what requirements you have to meet before you begin the process.

Operate a Foreign LLC in California Today!

Moving a foreign LLC to California isn’t as challenging as it may seem. Once you have an LLC formed in another state it comes down to remaining compliant in your state and following the steps that we covered in this article.

The most important thing you need to fill out is the LLC-5 California form, which is the foreign business application form. Once this form is filled out you can follow the rest of the steps we covered in the guide to register your foreign LLC in California.

For the best results, we always recommend working with a professional. It can help you get situated in California and make the process go smoothly.