Doing Business in California: What You Need to Know

Doing business in California requires you to be legally incorporated in the state. This means that if your company is a limited liability company (LLC) and is involved in a lawsuit as a result of doing business in the state, the lawsuit may be considered to be under the jurisdiction of that state's court system. Additionally, if you invest in a company, such as an LLC, you may be required to file tax liabilities, even if your core business is not found in California. If you have a large clientele in California and will do a lot of business there, it's good practice to talk to one lawyer (or a few) to determine if you're going to do business in California.

Interstate commerce is a federal law, but the California Franchise Tax Board (FTB) has filed cases against companies that did business in California and failed to meet their tax obligations. You are still considered to be doing business in the state for tax purposes if the business meets state requirements. Corporations, LLCs treated as corporations, and S corporations are required to provide their partners, members and shareholders with their proportional share in California and full ownership, payroll, and sales in CA Schedule K-1 so that their partners, members, or shareholders can determine if they are doing businesses in CA. In case you are unsure if your out-of-state LLC needs to file tax returns in California, you should contact a qualified business law professional who can guide you through the California Company Code.

As the manager of the LLC (although it is a single-member LLC and was formed in Florida), because you “actively participate in any transaction for the purpose of obtaining financial or pecuniary gain or gain on behalf of the LLC, the LLC is therefore doing business in California. Companies that are permitted pursuant to subsection (a) (a) of RTC 23040.1 to exclude from California source income their distributive participation of interest, dividends, and profits from the sale of qualifying investment securities of a qualifying investment company will also exclude those amounts from the share proof established in RTC 23101 (b). If the property, payroll, or combined sales exceed the limit amounts, Corporation G operates in California.

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