When You Need to Register Your Foreign LLC in California
Under California’s LLC Act, foreign LLCs must register with the state before conducting business. According to California law, a business is considered to be "doing business" in the state if:
- The LLC is incorporated or has a physical presence in California.
- Total sales in California exceed $636,446 or 25% of the LLC’s total sales.
- The value of property or payroll in California exceeds $63,644 or 25% of total property or payroll.
- The LLC engages in transactions for financial gain within California.
If your LLC falls under these criteria, you are required to register to avoid penalties and legal risks. Additionally, if your LLC collects sales tax or handles consumer data, compliance with California tax and privacy laws is essential.
Steps to Register a Foreign LLC in California
1. Obtain a Certificate of Good Standing
To register, your LLC will need a Certificate of Good Standing (also called a Certificate of Existence) from its home state. This document, issued by your home state’s Secretary of State, must be current (no older than six months) and demonstrates that your LLC complies with its state’s requirements.
2. Verify Your LLC’s Name for California
California law requires that your LLC’s name complies with state regulations. If your LLC’s name is already in use or doesn’t meet California’s standards, you’ll need to select an alternate name for use in the state. While not mandatory, you can reserve a name with the Secretary of State for $10 if you want to ensure its availability.
3. File an Application to Register a Foreign LLC
Submit the "Application to Register a Foreign LLC" (Form LLC-5) to the California Secretary of State. Include your Certificate of Good Standing and a $100 filing fee. Upon approval, you’ll receive a plain copy of your filed document for free, or you can request a certified copy for an additional $5.
4. File a Statement of Information
Within 90 days of registration, file the "Statement of Information" (Form LLC-12). This document must be updated every two years and includes details such as:
- LLC’s name and California file number.
- Names and addresses of managers or members.
- Principal business address and mailing address.
- Name and address of the registered agent.
The filing fee is $20, and you can file this document online for convenience.
When You Don’t Need to Register
Certain activities do not qualify as transacting intrastate business in California, so registration may not be necessary. These include:
- Defending or settling a lawsuit.
- Holding internal meetings for members, managers, or shareholders.
- Maintaining a bank account in California.
- Selling through independent contractors.
- Soliciting or obtaining orders that require out-of-state approval.
- Creating or acquiring debt or security interests.
- Conducting one-time transactions completed within 180 days.
Additionally, businesses are not required to register solely based on their status as:
- A shareholder in a corporation.
- A limited partner in a partnership.
- A member or manager in an LLC.
Tax Requirements for Foreign LLCs
Foreign LLCs conducting business in California must comply with the state’s tax regulations, including:
Annual Franchise Tax
All LLCs in California must pay a minimum annual franchise tax of $800. This applies to foreign LLCs as well, regardless of their revenue. Failure to pay this tax may result in penalties, including a $2,000 fine for non-compliance after receiving notice from the Franchise Tax Board.
Additional LLC Fees
LLCs with gross receipts over $250,000 must pay additional fees, calculated on a sliding scale based on revenue. For detailed thresholds and amounts, refer to California’s Franchise Tax Board website.
Member Tax Obligations
Members of foreign LLCs may be personally liable for California taxes on income derived from the LLC’s business transactions within the state, even if they are not California residents.
Frequently Asked Questions
What Is the Cost of Registering a Foreign LLC in California?
The base fee to file Form LLC-5 is $70. If you deliver the application in person, there is an additional $15 fee. Expedited processing is available:
- 24-hour processing: $350
- Same-day processing: $750
What Happens if I Don’t Register My Foreign LLC?
Failure to register can result in significant penalties, including:
- Fines for failing to meet tax obligations.
- Loss of the ability to enforce contracts entered into in California.
- Additional interest and penalties for unpaid taxes.
How Are Foreign LLCs Taxed in California?
Foreign LLCs are treated as pass-through entities by default, meaning profits and losses are reported on the personal tax returns of members. Alternatively, an LLC may elect to be taxed as a corporation.
What Information Is Required for Form LLC-5?
Form LLC-5 includes the following:
- LLC’s name as listed in its home state.
- Alternate name for California (if applicable).
- Date and state of formation.
- Principal office address.
- California office address (if applicable).
- Registered agent’s information.
- Signature of an authorized representative.
Why Choose Next Era Legal?
Registering a foreign LLC in California is a multi-step process requiring precision and compliance with state laws. At Next Era Legal, we:
- Ensure accurate and timely filings.
- Provide guidance on tax compliance.
- Assist with naming, documentation, and privacy considerations.
- Simplify the registration process, so you can focus on growing your business.
Ready to Expand Your Business to California?
Take the next step with confidence. Contact Next Era Legal today to schedule a consultation and learn how we can help you establish your foreign LLC in California. Click the “Schedule a Call” button or fill out our contact form to get started.
Disclaimer
All information provided is for educational purposes only, does not constitute legal advice, and does not establish an attorney-client relationship.
