Corporations that are incorporated in another state and are doing business in California should be mindful of compliance with California law. For example, out-of-state corporations must ensure they are properly registered to do business, that they familiarize themselves with laws regarding company employees working in California, and that they can bring or defend lawsuits in California if needed.

Out-of-state (also called “foreign”) corporations who transact business “intrastate” in California must register with the California Secretary of State. California Corporations Code §§ 2105, 15909.02, 16959, 17708.02. Transacting business intrastate means “entering into repeated and successive transactions of … business in this state, other than interstate or foreign commerce.” California Corporations Code §§ 191(a), 15901.02, 17708.03. There are a number of exceptions and exclusions to this definition of intrastate business. For example, a foreign corporation that merely holds a bank account in California is not doing intrastate business. California Corporations Code § 191(c)(3).

Registering with the Secretary of State involves filing a Statement and Designation by Foreign Corporation form along with a certificate of good standing from the foreign jurisdiction where the corporation is incorporated.

Foreign corporations should familiarize themselves with California laws regarding their area of business. For example, if a foreign corporation has employees who work in California, it will need to obtain worker’s compensation insurance and obey labor laws such as the California-specific overtime pay requirements. The corporation may need to consult an attorney licensed to practice in California on these issues.

Further, foreign corporations should pay taxes in California if applicable. See California Revenue and Taxation Code § 23101. One of the best reasons to do so is to secure the corporation’s right to sue and defend lawsuits in California. Corporations that do not file tax returns may be suspended by the Franchise Tax Board, leaving them unable to sue or defend lawsuits. See, e.g., Timberline, Inc. v. Jaisinghani, (1997) 54 Cal.App.4th 1361. A suspended corporation might find itself a defendant in a lawsuit with an adverse judgment entered against it.

Other requirements beyond those described above also apply to out-of-state corporations in California. Do your due diligence by contacting an experienced business lawyer to assist you. Knowledgeable about corporations in California, Michael Leonard, Esq. of San Diego Corporate Law, can help. Contact Mr. Leonard by e-mail or calling (858) 483-9200.