Businesses should not necessarily incorporate their business entities in a different state in order to save money. Investors may consider the annual $800 Franchise tax required for business entities that are incorporated, registered, or doing business in California, onerous.
However, all business entities in California are required to register with the California Secretary of State and to pay the Franchise tax. Those caught doing business in California with unregistered entities incorporated elsewhere, will pay the financial penalties imposed by the California Franchise Tax Board. Such penalties include an additional 10% penalty of the unpaid/underpaid amount (Revenue and Taxation Code 17942). Consequently, it is highly advised that all companies planning to do business in California, incorporate in California.
For your own protection, please seek the advice of a qualified tax professional regarding all tax matters. If you need help in establishing your business entity for real estate investments or other business endeavors, contact Kendall Law. Ms. Eileen Kendall of Kendall Law is a skilled attorney with over 15 years of experience counseling businesses. For a consultation, contact Kendall Law at (310) 619-4941.
Part of Kendall Law’s Best Business Practices blog series
Next time, we’ll cover the differences between an LLC, a trust and an insurance policy.
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