California isn’t only the best state to explore the world’s fascinating attractions, it is considered a lucrative market for entrepreneurs who want to see their business thrive. But before starting a business in California, ask yourself if you are qualified for California foreign qualification?
If your LLC or Corporation was formed outside of California but you are doing business in California, you must qualify/register your business with the California Secretary of State. You should qualify for California foreign qualification.
Not sure what exactly is California foreign qualification and why should you really care?
Well, you need to get the certificate of qualification to do business in California. To achieve this, you should also find out about the legal procedure of getting the required foreign qualification recognition.
If you want to explore more about what exactly is a foreign qualification in California and how to qualify as a foreign business in California, this post is written for you.
If you have any questions about out of state LLC or Corporation doing business in California, email me at sam@mollaeilaw.com
What is California Foreign Qualification?
Foreign Qualification is the process of registering your out-of-state LLC or Corporation to do business in California. The word, “foreign” does not indicate “other country.” In fact, it aligns with the other state.
Getting Foreign Qualification will allow your LLC or Corporation to legally do business outside the state in which your business was formed.
It’s not difficult to qualify for a foreign certification. Once you have learned how to get your LLC or Corporation qualified to do business in California, you can register easily.
Why Do I Need to Get Foreign Qualification in California?
In the United States, just because you are registered to do business in one state does not mean that you can legally do business in another state.
If you want to do any business in a state other than the state in which your LLC or Corporation is registered, you will have to register with the state in which you will be doing business before you can legally conduct business there.
Sometimes California-based businesses think that they can avoid California registration fees and taxes by forming their business entities in another state. This is incorrect.
If your LLC or professional corporation is doing business in California, then it must register with the California Secretary of State, even if the entity was formed elsewhere.
For example, an LLC that is registered in Delaware wants to do business in California. The Delaware LLC is a “Domestic” LLC in Delaware and will be considered a “Foreign” LLC in California.
The Delaware LLC will need to register with the California Secretary of State as a California Foreign LLC.
Also, keep in mind that most banks will not open a business bank account for a company that has not yet completed its Foreign Qualification process.
How Do I Know If I Need Foreign Qualification?
Generally, you will need to get Foreign Qualification at the time of your business formation.
However, if you’re uncertain as to whether or not your company is doing business in another state, ask yourself the following questions:
- Does your company have a physical address in the state?
- Does your company accept orders in the state?
- Are you paying employees in the state?
- Does your company hold any assets in the state?
- Have you opened a business bank account in the state?
Please keep in mind that it is typically best to consult an attorney regarding Foreign Qualification for your LLC or Corporation.
If you are still confused if your company is the one that is an out of state LLC or Corporation doing business in California and must be having a certificate of qualification to do business in California, email me at sam@mollaeilaw.com
What is Considered “Doing Business” in California?
The term “doing business” in California is defined as “entering into repeated and successive transactions of business.”
So, if you are doing repeated business with customers, suppliers, and other businesses that are located in California, you will need to get Foreign Qualification to do business in California even if your LLC is Corporation was formed outside of California.
This is true even if you operate an online business in California. As a result, your online business will be considered as a functional business in California and you will need to get Foreign Qualification.
What If I Don’t Get Foreign Qualification?
For LLCs and Corporations, getting Foreign Qualification is required before doing business in California. Corporations that do not register before transacting business in California are subject to financial penalties (Section 2203).
Also, a foreign business entity that does business in California without registering in California is precluded from maintaining in California court actions from such business.
How Long Does it Take to Get Foreign Qualification in California?
Processing times for California Foreign Qualification applications typically take 10 to 15 business days. There are options for expedited services with 24-hour turn around as well.
How Do I Qualify/Register an Out of State LLC or Corporation in California?
An out-of-state business can qualify/register to do business in California by filing the application form with the California Secretary of State.
To ensure that all issues are considered and addressed appropriately, it is highly recommended to seek the assistance of a business lawyer to submit foreign qualification documents to the California Secretary of State.
Note: Many registration documents are returned for correction without being filed because of name issues, errors, omissions or misstatements contained in the proposed filings submitted to the Secretary of State. In order to avoid these, it is always best to have a business lawyer submit your foreign qualification.
Conclusion
If you need to qualify your business to do business in California, the following process should be followed:
Get a business lawyer to prepare and file your Application to Register a Foreign LLC (for LLCs) or Statement and Designation by Foreign Corporation (for Corporation). The business lawyer will ensure all issues are considered and addressed appropriately and file your application with the California Secretary of State.
This way, you will receive your Foreign Qualification to do business in California.
To ensure that all issues are considered and addressed appropriately, it is highly recommended to seek the assistance of a business lawyer to submit Foreign Qualification documents to the California Secretary of State.
Note: Many registration documents are returned for correction without being filed because of name issues, errors, omissions or misstatements contained in the proposed filings submitted to the Secretary of State. In order to avoid setbacks and delays, it is always best to have business lawyer submit your Foreign Qualification.
Email me at sam@mollaeilaw.com to get started on your Foreign Qualification
