Many companies conduct business in California without having incorporated under the laws of this state. While this is entirely lawful, it does expose such businesses to civil liability. This risk can be mitigated by filing a Certificate of Qualification. This process enables a foreign corporation to operate in California with the protection of California corporate laws. An experienced California corporate attorney can help your business determine whether filing a Certificate of Qualification is appropriate for your business. An experienced California Corporate attorney can also help entrepreneurs determine which state they should incorporate their business in.
What is the Difference Between a Foreign and Domestic Corporation?
In California, a domestic corporation is one that has incorporated under the laws of California. A foreign corporation is one which has incorporated under the laws of another state. As is common in business, many foreign corporations do business in California. This can expose the business to liability under California law. Any business which “reaches into” California for the purpose of doing business is subject to the jurisdiction of California courts over that transaction. Thus, a foreign company which does business in California may find itself subject to the jurisdiction of the California courts, but without the protection of California corporate laws.
Foreign corporations can give themselves some legal protection by obtaining a Certificate of Qualification from the California Secretary of State. This certificate provides the business with corporate status and legal protection. It also subjects the business to tax liability and administrative fees. Businesses must, therefore, determine whether their potential liability in California is sufficient to justify these costs. Businesses that do a lot of business in California face higher risks of liability and are thus more likely to find the cost of a Certificate and state tax liability to be worth the investment.
Choosing the State of Incorporation for a Startup Company
When forming a new business, entrepreneurs may find themselves with a choice of states in which to incorporate. There are many considerations which should be thoroughly investigated before making this decision. Business tax liability can vary greatly from state to state. Certain types of businesses may need the legal protection afforded by state laws. For example, Delaware has a separate court to hear corporate matters, and this court has developed a well-settled body of case law. Businesses in Delaware are, therefore, able to make effective settlement of business claims and make sound litigation decisions based on extensive precedent. While the company’s principal place of business is a logical choice for incorporation, it is not the only choice. An experienced corporate attorney can help you explore the options to find the state of incorporation which best meets your company’s needs.
Experienced Legal Representation to Protect Your Business
Businesses have many financial and legal interests which must be protected. The skilled corporate attorneys at Structure Law Group will work with your business to identify all potential areas of risk and access the tools which will best protect your business from that risk. Call (408) 441-7500 today, or email firstname.lastname@example.org to schedule your consultation with an experienced California corporate attorney.