When you form an entity in one state and do business in a second state, you must register or (qualify) to do business in the second state. For example, if you set up a Nevada corporation for the asset protection benefits and are doing business in California you must file your Nevada corporate papers (including an up-to-date Certificate of Good Standing from Nevada) for the Nevada entity with the California Secretary of State. The process of qualifying involves getting California’s permission for the Nevada entity to operate in California. (Please know that we can assist with qualifying in any state. If it is done right and the fees are paid, permission is always granted.)
In our example, the now-qualified Nevada corporation would be paying fees on an annual basis in two states: Nevada the state of formation and California the state of qualification. (Also know that California gets quite combative if you don’t pay their annual $800 fee to the California Franchise Tax Board (note: this must be paid by the client of their CPA). The penalty is $12,000. No other state is so aggressive on this issue.) Still, in most states, failing to qualify can result in the entity being unable to bring or defend a lawsuit.
You are much better off qualifying to do business in a state where you have employees, have a physical office, or are present for more than 30 days a year engaged in business. Corporate Direct can assist with this important filing requirement. For more information or to get started, call us today at 1-800-600-1760 or sign up for a free 15-minute consultation.