Prior to launching your business, any limited liability company or corporation needs to pay California’s minimum franchise tax ($800) if using a California address as your company headquarters. A company that plans to have its base in, say, Oregon while registering to sell goods in California, may also need to pay the franchise tax fee, depending on various factors, including whether it leases space or hires employees in the state of California or if any of the conditions set forth below are satisfied.
The California Franchise Tax Board stipulates that this tax be paid whether or not the company is profiting from the business. If your company had grand plans but shut down within the first few months of launch, that tax will be due nonetheless. Beyond these basics, a company will be considered a California company tax-wise if minimum revenue levels are met.
An experienced business lawyer can explain the details of what the state considers “doing business in California,” if you are a company with a foreign or out-of-state address. For instance, if the amount paid by the taxpayer for compensation to California employees exceeds the lesser of $53,644 or one quarter (25%) of total compensation paid by the taxpayer, then the business is registered for business in California as far as franchise taxes are concerned.
There are other markers to determine if your business (online or otherwise) counts as a California entity. If state sales exceed $536,446 (or more than 25% of total sales) through direct representatives or contractors, the bar has been met. If equipment or property in the state exceeds $53,644 or 25% of the company’s real and tangible personal property, the California designation and the accompanying taxes will apply.
Companies (online or otherwise) operating in California from out-of-state and foreign addresses will need to register in-state in many cases. Contact the Hakim Law Group when you need a professional, trusted and reputable business lawyer in Los Angeles who can help you get your business on the right track. For further information or to schedule an appointment Afshin Hakim please contact us at 310.993.2203 or visit www.HakimLawGroup.com.
