What Is a Delaware Corporation Doing Business in California?
A Delaware corporation doing business in California is both legal and commonplace, and there are reasons to do this even if California is the principal place.3 min read
Updated July 7, 2020:
A Delaware corporation doing business in California is both legal and commonplace. Founders may decide to do this for many reasons, even if their principal place of business will be California. While perfectly legal, there are a few practical points for consideration.
First and foremost, all Delaware corporations must have a Registered Agent in the state of Delaware. If you're planning on incorporating in Delaware but are located in California, you'll be required to have a Registered Agent. Plenty of companies exist for this very reason, and their fees may be as low as $100 per year.
Once a Delaware corporation has been formed, the founders must have the corporation resolve in order to do business in other states. Typically, this is carried out by a board resolution at the initial board of directors meeting. However, it can also be accomplished via written consent in place of a meeting.
Before a corporation is able to carry out intrastate business in California, it will have to qualify and register with the California Secretary of State. This can be initiated with a Statement and Designation by Foreign Corporation.
There are two sections in the California Corporations Code worth highlighting. They are sections 191, 15901.02(a) and 17001(ap). These codes consider intrastate business to be successive transactions carried out within the state, as opposed to interstate and foreign commerce.
Fees for Filing
Choosing to register a corporation as a foreign business entity in California will set the company up for the minimum franchise tax of $800 per year after the first year. Keep in mind that regular franchise taxes still apply, even with the minimum franchise tax. Take note of the following fees:
- A $100 filing fee.
- A $50 fee for a Certificate of Good Standing from the state of Delaware. (That certificate will be required to file your Statement and Designation.)
- A $5 fee if you'd like to receive a file-stamped copy for your records.
Doing Business in California
If you're a Delaware LLC planning to do business in California, you'll be considered domestic to Delaware and foreign to the state of California. The reason Delaware is such a popular domestic choice is because it allows you to leverage the corporate law structure.
When your business has a physical presence in California due to its operations, employees, bank accounts, or assets, you'll need to go through what's known as foreign qualification in order for the business to operate there.
Foreign qualification will enable you to carry out business in California. Failure to abide by local compliance laws may put the entire company at risk. That's why California requires companies to apply for registration and produce a Certificate of Incorporation from Delaware, as well as a Certificate of Good Standing. Each of these documents must be fulfilled within the last six months.
A Registered Agent in California is important because he or she will liaise with the state. This will also provide you with the necessary physical address within the state of California, allowing you to receive legal documents.
Some companies choose to be their own Registered Agent, but you'll also find others will seek out the support of their Delaware Registered Agent. Typically, a Delaware Registered Agent can also serve in this capacity in California.
California law requires the person with authority to sign the laws of the state of the organization in order to complete the application. Information provided to the state of California will also be made public. That said, there's no publication requirement, unless the county where your registered agent lives mandates one.
After your company is registered in California, there will be specific reporting requirements:
- The initial reports will be due 90 days from filing.
- The biennial reports will be due on the last day of the month you filed.
The costs come in at $30 for the initial report, as well as $20 for all subsequent reports. A late fee of $250 will be imposed by the state of California if these requirements aren't met on time. And don't forget about that franchise tax of $800 per year.
If you need help with a Delaware corporation doing business in California, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.