When do I need a California foreign corporation?
If you're a small business owner somewhere near the West coast and business is booming, you might decide to expand your business to take advantage of other markets, possibly across state lines, and California is a great place to grow and expand a small business. But before you sign the lease to your new corporate offices and throw wide your doors, bear in mind the filing requirement that is the difference between a happy and successful relationship with the state and a swift penalty for failing to comply as a welcome to the neighborhood: registering your California Foreign Corporation.
A California Foreign Corporation is a required filing of any corporation that has been registered in another state (its domestic state) and is considered by the state to be doing business in California. While the state will not offer to interpret the law on your behalf, and while legal advice is always best sought from your lawyer or legal advisor, a loose, general rule of thumb is that if you run an online store and someone living in California purchases an item, you are not considered to be doing business in the state -- but if you open a corporate office in California and ship the sold goods from there, you likely would be required to file a California Foreign Corporation.
What will I need in order to receive my California Foreign Corporation?
There are a number of documents you must submit in order to register and conduct business as a foreign corporation in California.
Statement and Designation by Foreign CorporationWhen you're ready to register your foreign corporation in California, you will draft a document similar to the Articles of Incorporation you used to start your business in your domestic state, called the Statement and Designation by Foreign Corporation form. This form will ask for information about both your existing business and your new business.
The Foreign Corporation form will include information on the following:
The legal name of your corporation, as it is laid out in the most recent version of your Articles of Incorporation in your domestic stateThe jurisdiction under which your corporation was initially formed; your domestic stateYour principle executive office address, likely located within your domestic stateThe address you intend to you use in California, if applicable (it is perfectly possible to be legally considered doing business in California without holding an office in the state)Your agent, or registered agent, who is to be the contact person for the California foreign corporation and is to have a physical home address in the stateSignature and affirmation of a corporate officer
Relative to many other states, the California Foreign Corporation formation document is very simple -- the printed form takes up only two pages.
Sometimes also called a Certificate of Existence or Certificate of Fact, the Certificate of Good Standing is a document from your domestic state showing that you not only exist but that your corporation has a status within the state of Active, and that it is in good standing in the domestic state. If your Certificate of Good Standing shows that you are in Default, you will not be allowed to register your California Foreign Corporation until you have corrected whatever issue was keeping you from being in good standing.
This requirement is not specific to California -- most states require a Certificate of Good Standing or similar document. Not all states have this requirement; in Texas, for example, you are required to confirm that your corporation is in good standing in its domestic state, but no formal documentation to support this claim is required. (Although if you lie, the Texas Secretary of State will be less than pleased and your ability to legally conduct business within the state will be revoked.) Other states, such as Virginia, require, rather than the Certificate of Good Standing, the original Articles of Incorporation and any subsequent filed amendments, certified by the Secretary of State.
The registration fee for a California Foreign Corporation is currently $100. There are also expedited filing options, information on which can be found on the Secretary of State's fee schedule.
While not required to be submitted along with the Foreign Corporation registration documents, a Statement of Information for Foreign Corporation form is required of all foreign entities within the month that they file (or the immediately preceding five calendar months), so many choose to complete and submit the document along with the California Foreign Corporation paperwork. The filing must be repeated annually to that the Secretary of State's office is aware at all times of updated information on your business.
The Statement of Information contains information about the business not included on the Statement and Designation by Foreign Corporation, including:
CEO's name and addressSecretary's name and addressCFO's name and addressType of business of the corporationOther information that duplicates information on the Statement of Information can also be provided on the form, if there are any changes to be made.
Where do I register my California Foreign Corporation?
There are a number of ways to go about setting up your foreign corporation, depending on the degree of assistance you would like in preparing the paperwork. (While you are certainly able to draft and submit these documents on your own, it's usually best to run any filing decisions you make by a corporate lawyer or legal advisor.)
A corporate attorney will help you decide what type of entity to form and determine the answers to any compliance-related questions you may have. He or she can then prepare your Statement and Designation by Foreign Corporation (typically by assigning the drafting to a paralegal, who will fill out your paperwork based on information you've given the attorney) and file the documents for you.
Any lawyer service will incur legal fees, fees which are certainly deserved for legal assistance, but which may be considered high for the drafting service aspect of the service.
This is a solution for those who are too busy or flustered with the responsibilities of not only running a business but preparing for a second to have the time to spend looking into paperwork formalities and requirements.
There are a ton of third-party filing services out there, most of which have similar services. Most of them are completely reputable, and take the information that you provide to draft and customize the Statement and Designation and file the California Foreign Corporation for you. Do your research -- what costs you $239 at one company might cost only $97 at another company. And read terms and conditions carefully -- a corporate officer's signature is a requirement, so don't be surprised when you receive an email asking you to print and sign a form.
This is a great solution for business owners who are comfortable with government paperwork and have the time to draft them properly (any mistakes present in the application will add a delay to the already astronomical registration wait times). To do so, download the forms from the Secretary of State's website and submit your registration by mailing or delivering it to: Secretary of State, Business Programs Division, Business Entities, 1500 11th Street, Sacramento, California, CA 95814.
However you decide to submit your Statement and Designation of Foreign Corporation, note that the Secretary of State, due to budget cuts, has closed all of its branch offices over 2010 and now operates solely in one office. Because of this, filing times are somewhat delayed (though there are near-immediate expediting options for those willing to pay for such services).
Sarah Kolb, http://www.clickandinc.com/
Since 2000, Click Industries, Ltd. has been helping thousands of small business owners, independent entrepreneurs, writers and musicians start new business ventures, protect their intellectual property, find new ways to market and promote their businesses and creative works, and register a Foreign Corporation.
