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Foreign entity registration in California: How to qualify

November 17, 2023
Collin Pham

Does your out-of-state corporation need to register as a foreign business in California? This blog will help you answer this question. We’ll also help you clarify how California foreign entity registration works and when you may qualify for it.‍

Note: If you’re a new business that hasn’t been incorporated yet, start with our resource on how to incorporate a startup.

What does registering as a foreign business or entity mean?

When a business expands its operations or intends to conduct business in a new jurisdiction, it is considered a foreign entity in that specific place. 

Your business is considered a “foreign business” in California if it’s incorporated in any other state or country, but you want to do business within California. To do this, you’ll need to register as a foreign entity.

Registering as a foreign business typically involves filing paperwork, hiring a registered agent in California to accept legal documents on your business’s behalf, and paying any required fees, but first we’ll unpack the legal meaning of “doing business” in California.

How to tell if you must register as a foreign entity‍

Understanding whether you’re required to register to do business and file for a foreign qualification in California depends on whether you’re doing business in the state. The California Government considers you to be doing business if you meet any of the following criteria:‍

You engage in financial transactions in California

If you make money or intend to make money while physically located in California, you qualify to do business there.

For example, let’s say you own a bagel store that makes bagels in Oregon. You decide to pursue intrastate business and open a new bagel store in California, so now you’re “doing business” in the state of California.

Selling physical or digital goods online to customers located in California doesn’t qualify as doing business there unless specific criteria are met (which we’ll discuss below).

You have a commercial domicile in California

If California is your principal place of business, you are qualified to do business there.

For example, if your company headquarters is in California, that’s considered your principal place of business. Similarly, suppose your company is remote and has no offices, but is managed by the founders or executive team remotely from within California. In that case, it’s likely your principal place of business is there as well.

If you have remote employees throughout the country and none of your executive team is in California, it’s unlikely to qualify as your principal place of business.‍

Your annual sales in California exceed $690,144 (or 25% of your total sales)

This criteria only applies if your business has sales in California. If your business does not have California-based sales, you can ignore this criteria.

If your business’s California-based sales exceed $690,144 (in 2022) or account for over 25% of your total sales, then your business needs to file for California foreign corporation registration.

For example, let’s say you sell digital goods to two customers. Each customer pays you $10,000 a year, and one of them is based in California. In this case, you’d have to register to do business in the state. 

Why? Because 50% of your sales are attributed to a California-based customer.‍ However, if you sell $10,000 a year to 10 customers with one based in California and the other nine in your home state, you wouldn't need to register because your California-based sales would only be 10% of your total sales.

You have a property valued at over $69,015 (or 25% of total property value) in California

If your business doesn’t own property in California, you can ignore this criteria.

If the value of your business-owned property in California exceeds $69,015, or the value of business-owned property in California accounts for over 25% of your total business-owned property, then your business needs to file for California foreign corporation registration.

For example, say your business owns property in California valued at $50,000. You also own property in New York valued at $50,000. In this case, you’d have to register to do business in California because 50% of your business-owned property is California-based.‍

Your California payroll exceeds $69,015 (or 25% of total payroll expenses)

If your business does not pay California-based employees, you can ignore this criteria.

If your business runs payroll for individuals in California, and that amount exceeds $69,015 a year, or that amount accounts for over 25% of your total payroll, then you must register as a foreign corporation in California.

For example: You run payroll for four individuals. Each person makes $25,000 a year, and two of those individuals are based in California. You would be required to register to do business in the state because 50% of the business-run payroll is attributed to California-based employees.‍‍

How to know if you don’t need to register as a foreign entity

Some activities may seem like "doing business," but not all of them require registering as a foreign entity in California. There’s a distinction between "transacting" and having a mere presence or participation in passive activities in the state.

Let’s look at a few activities your business may conduct in California without needing to register as a foreign entity.

You handle company affairs in California

You can visit California for certain business purposes without being required to register as a foreign entity. Examples of this include attending trade shows, holding internal business meetings, board meetings, or company retreats.

Your business sells through independent contractors in the state

Having a mailing address or a P.O. Box in California doesn't constitute a need for foreign qualification. In addition, if a business uses independent contractors for sales without establishing a direct presence or control, it may not require registration.

For example, if a sunglasses manufacturer solely uses California-based independent contractors to market their line to retailers, the company doesn’t need to register as a foreign entity.

You collect debts or evidence of debts in the state

Activities related to debt collection or holding debt agreements in the state aren’t usually considered transacting business and don’t require registration.

For example, if a Georgia-based business holds a portfolio of consumer debt agreements all over the country, it wouldn’t be considered a transacting business in California and wouldn’t need to register.

You must defend a law claim in California

If you have legal claims in California but don’t have a significant business presence there, you may not be required to register your business as a foreign entity — as long as your activities are limited to defending the legal matter. Participating in legal proceedings or defending a lawsuit or legal claim in California does not equate to transacting business in the state. 

Your business maintains a bank account in California

Having a bank account in California alone generally doesn't qualify as doing business. It’s considered a passive activity because it doesn’t constitute a physical presence, revenue generation, or regular business transactions, and so it doesn’t require you to register your business as a foreign entity in California.

What happens to businesses that don’t register as a foreign entity?

Businesses that meet the registration criteria but fail to register as foreign entities in California may face a range of legal and financial repercussions:

  • Fines and penalties
  • Loss of certain rights and legal protection
  • Ineligibility for contracts, licenses, or permits in California
  • Subject to state and local taxes they wouldn’t otherwise be subject to
  • Reputational damage from operating without proper registration 

Steps to register your business as a foreign entity in California

Once you’ve determined your business must be registered as a foreign entity, you’ll need to take action. We’ve laid out a step-by-step plan for handling the process.

1. Determine if you must register

As we mentioned above, transacting business in California may include conducting business, owning property, having a presence, or paying California employees. Business leaders should consult with tax or finance professionals or seek legal advice if they’re unsure whether they must register.

2. Check if your business name is available in California

See if the business name you used in your home state is available by doing a California Business Entity Search. You can request a California name reservation to hold your chosen name for a limited time. Name reservations come with a $10 filing fee. If the name is already taken, you’ll need to choose a different name. This may be a “doing business as” (DBA) name, otherwise known as a fictitious business name (FBN).

3. Obtain a Certificate of Good Standing

Acquire a current Certificate of Good Standing from your company’s home state to verify your business does exist and is in good standing with the state. The certificate needs to be issued within the last six months by an authorized public official.

4. Prepare and file Statement and Designation by Foreign Corporation

Before qualifying to do business in California, a company or out-of-state LLC must file a foreign registration statement with the Secretary of State. The form for foreign corporations is the Statement and Designation by Foreign Corporation, while the LLC form is the Application to Register a Foreign LLC (Form LLC-5).

These forms include the contact person’s information along with company information like its name (or alternate name), street address for your principal office, and service of process.

5. Designate a registered agent for service of process

Hiring a California-based registered agent is another requirement for foreign entities doing business in the state. A registered agent is authorized to receive mail, tax, and legal correspondence on your business’s behalf, making them an essential part of the registration process. 

If you have a location in California, you might decide to be your own registered agent. However, if your company doesn’t have a California-based employee, you can always hire a third-party registered agent to operate on your behalf. As a Stable business address customer, you can easily add registered agent services to your plan for $25 per month.

6. File forms with the California Secretary of State

You must file your Foreign Registration Statement and Certificate of Good Standing along with a $100 filing fee ($70 for LLCs).

Keep in mind that California corporations must file a Statement of Information within 90 days of registering — and every year after that — to maintain compliance. California corporations must also pay an $800 franchise tax fee annually to the California Franchise Tax Board.

7. Register for state taxes

Tax requirements vary according to the nature of your business, sales volume, and whether your company is physically present in the state.

  • Apply for a seller’s permit (if required). If your business sells retail or wholesale goods in California, you’ll need to register for a seller’s permit. 
  • Receive your tax ID Number. Use this number for filing state tax returns and handling any communication with the state regarding your tax account. 
  • Collect the appropriate amount of sales tax. Collect the correct amount of sales tax from your California customers and file regular tax returns with the California Department of Tax and Fee Administration (CDTFA)

Work with Stable to make your registration process simple

Whether you own a company that’s expanding physically into California, employ California residents, or have customers in the state, you might need to register your LLC or corporation as a foreign entity. Following the guidelines above will keep your business compliant and help you avoid costly fines.

While the registration process can be cumbersome, Stable can make certain aspects much simpler. If you’re registering your business as a foreign entity in California, you’ll need a reliable virtual address and mailbox to streamline mail operations. 

With Stable virtual mailboxes, it’s easy to open, forward, or shred mail — no matter where you’re located. Stable offers all these, plus registered agent services and exceptional customer support.

Let us support your business’s expansion — team up with Stable today


At Stable, we provide permanent virtual addresses and mailboxes so you never have to worry about mail or changing addresses again. We’ll digitize all mail that you receive here, and you’ll be able to scan, forward, shred, (and even deposit checks!) from anywhere in the world.

Get started with Stable here if you’d like a virtual business address + mailbox in less than 3 minutes. 

Disclaimer: Stable is not a legal or accounting firm, therefore we cannot provide legal or tax advice. You should consult legal and tax professionals for advice on how to meet ongoing obligations that apply to you and your company.

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