Expanding your company’s business operations is one way of reaching growth. It also allows you to reach a wider market and provide services or products in more places or to more people. If you are thinking about transacting business in California but do not want to form a new limited liability company (LLC), then you should undergo the foreign qualification process.
Understanding What Foreign Qualification Is
Business owners who want to expand their operations in a state different from the one where they formed the company should register using the foreign qualification process. It is to register the business with the state and ensure that all its operations will be legal. In other words, you need to register as a foreign LLC in California if you want to do business within the state. If you are conducting any of the following, you will need to foreign qualify:
- Your LLC has at least one sales representative within California.
- Your company has an office there.
- Your company has a store in California.
- Your company owns a warehouse located within the state.
Importance of Foreign Qualification In California
California requires it if you are going to conduct business in the state. Not registering your foreign LLC comes with various consequences. Your company will not be able to bring a lawsuit in a court in the state. You can also face fines and monetary penalties.
Things That Your LLC Should Do
States have different laws when it comes to foreign LLCs. You should make sure you follow the process carefully and provide all the necessary information to avoid any complication. To register foreign LLC in California, you need to do these five steps.
First, your company should secure a Certificate of Good Standing from the state where you formed the business. It should not be more than six months old. In order to get one, visit the office of the Secretary of State of your company’s home state.
Second, check if your company name is available. You can reserve the name prior to the registration. This way, you can secure it while you are not yet sure if you will succeed to foreign qualify in California. To do this, you can apply for a name reservation with the California Secretary of State for $10. Doing this will reserve the business name for up to 60 days.
If your company name is no longer available for you to use, you should use a Do Business As (DBA) or fictitious name. It will be the name you will use for your company while it operates a business in California.
To make sure that your company name gets approval, you should follow the state’s naming law. Include in your company name the words limited liability company, ltd liability company, ltd liability co., LLC, L.L.C. You can also check if your proposed company name is still available by using the business search tool on the website of the California Secretary of State.
Avoid including words that can confuse your company for a government agency. Additionally, you cannot use the words bank, trust, trustee, incorporated, inc., corporation, corp., insurer, or insurance company.
Third, you should appoint a registered agent in California. The agent, which can either be an individual or a company, will be in charge of all legal correspondence between you and the state. They will handle all the legal documents that your company will receive and pass them on to your LLC.
To qualify as a registered agent in California, an individual should be at least 18 years old, a California resident with a physical address within the state, and available during normal business hours. You can also opt to get a qualified company to help you if you do not want to appoint an individual.
Fourth, you can now fill out the Application to Register Foreign LLC (Form LLC-5) and submit it to the office of the Secretary of State of California along with your company’s Certificate of Good Standing. You should also prepare $70 for the filing fee. You can download a copy of the application form from the official website of the Secretary of State.
The Secretary of State will give your LLC a plain copy of your document for free once they finish processing your application. You can request for certified copies, but they are an extra $5.
Fifth, you should file a Statement of Information. You are to submit it within 90 days of your company’s registration. After filing the initial statement, your foreign LLC has to submit Statements of Information every two years. You have to pay the $20 filing fee.
Information That You Will Need
As you go through the process, you will have to provide some necessary information. The state will need you to include basic information about your business. Thus, you have to prepare the following:
- LLC name as stated on the certificate of Good Standing
- An alternate name for your company’s California operations if the original name is unavailable
- The date you formed the LLC
- Principal office street address
- Principal office mailing address
- Address of your office in California, if any
- Information, such as name and address, of the company’s registered agent
- Signature of an authorized person
Taxes Your LLC Should Prepare For In The Future
Your company’s obligations do not end even after getting the approval of the Secretary of State for your foreign LLC.Do not forget about the tax requirements that California has set for foreign LLCs. You have to remit the franchise tax worth $800 annually.
Transacting business outside of your home state offers many opportunities. It can be an exciting adventure. However, you should make sure you follow the laws of the state where you wish to expand your operations. This way, you can be sure that your LLC’s transactions are legal, and you will not have to worry about possible issues in the future. If you want to understand the process better, you can consult a reliable company like DoMyLLC. Our team can assist you and make the process easier for you. Contact us now and find out how we can help with your LLC’s foreign qualification in California.
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