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One caveat for those conducting business from California is that you have to pay the CA $800 franchise tax even if you incorporate in another state. This seems

by d_r 16y ago

One caveat for those conducting business from California is that you have to pay the CA $800 franchise tax even if you incorporate in another state. This seems to be something people don't catch after filing it do-it-yourself Delaware co's/LLCs online. If you're running your startup from California, incorporating in Delaware technically exposes you to costs from both states. The CA tax is waived in just a few cases. For example, some types of corporations (not LLCs) are exempt in the first year, and an LLC that is dissolved before the first year and meets other requirements may also be exempt. Disclaimer: I am not a lawyer. Reference: http://www.ftb.ca.gov/FORMS/misc/1063.pdf http://www.ftb.ca.gov/FORMS/misc/1063.pdf (Also, we're lucky to have contributors like grellas in the HN community. Thanks.)

rprasad 16y ago
That's correct. California requires "foreign" corporations (any business entity incorporated in another jurisdiction) "doing business" in Califoria to register as a foreign corporation (or LLC) in California. This "franchise tax" is similar to the "franchise tax" paid by domestic corporations (incorporated in California), and is the greater of net income from California activities (all activities, for California-based companies) or $800. The franchise tax for foreign corporations is heavily dependent on having a physical nexus to California, such as offices, employees, or equipment located within California borders. For example, registering as a Nevada company but headquartering in Santa Monica would result in the imposition of a franchise tax. While this situation is quite common, it usually has the nasty side effect of subjecting the business to nasty tax penalties for not paying franchise taxes they thought did not apply. The franchise tax is waived for domestic S-Corporations in their first year of existence, unless they are profitable. LLCs are required to pay the franchise tax whether or not they dissolve in the first year unless they were never a going concern (i.o.w., they never actually did any business).

by d_r 16y ago

rprasad 16y ago

That's correct. California requires "foreign" corporations (any business entity incorporated in another jurisdiction) "doing business" in Califoria to register as a foreign corporation (or LLC) in California. This "franchise tax" is similar to the "franchise tax" paid by domestic corporations (incorporated in California), and is the greater of net income from California activities (all activities, for California-based companies) or $800. The franchise tax for foreign corporations is heavily dependent on having a physical nexus to California, such as offices, employees, or equipment located within California borders. For example, registering as a Nevada company but headquartering in Santa Monica would result in the imposition of a franchise tax. While this situation is quite common, it usually has the nasty side effect of subjecting the business to nasty tax penalties for not paying franchise taxes they thought did not apply. The franchise tax is waived for domestic S-Corporations in their first year of existence, unless they are profitable. LLCs are required to pay the franchise tax whether or not they dissolve in the first year unless they were never a going concern (i.o.w., they never actually did any business).