Legal Question in Business Law in California

Re: Foreign Qualify LLC Web Business

First, I'm clear that you are thinking of forming and using an LLC, not a corporation.

Next, I think you have to really examine your reasons for thinking there is ANY advantage to your being a Delaware LLC, or for that matter, domiciling your LLC in ANY state other than where it will be conducting business. I think a rational analysis will show there is none. Large (public) companies do enjoy some slight advantage, sometimes, by incorporating in Delaware or another state that promotes itself as a business haven. One is that management can pass rules making a hostile take-over (proxy war) more difficult for the aggressor. The "advantages," however, don't materially help small businesses, and can make life much more complicated (multiple tax returns, multiple filing of reports, apportioning income, etc.)

Your business, even if it is conducted largely over the Internet, nevertheless is situated somewhere. If the sole manager or member of the LLC sits down at a keyboard and grabs a mouse in California to look at and process order flow, it would be hard to argue to a judge or jury that the LLC was conducting business in Delaware and not California. Conducting the business in California inexorably leads to a duty to register in California, either as a domestic (California) LLC, or as a foreign (Delaware) LLC registered to do business in Caifornia. Both then require you to pay the California franchise tax (minimum $800 a year).

Failure to be registered would, among other things, deny you access to the California courts in case the business needed to sue someone (Small Clams included) and could impair the ability of the business to defend if it were sued here or elsewhere.

Re: Foreign Qualify LLC Web Business

You can register the LLC in Delaware, but you would have to file a foreign corp statement with California regardless. This arrangement is rarely advantageous for our small business clients and we often recommend incorporating in California from the start. If you would like more guidance, feel free to contact our office.

Yours truly,

Bryan

619.400.4929

Re: Foreign Qualify LLC Web Business

The question is where are you based? The answer is California. You need a California entity or a foreign entity qualified to do business in California.

There is no reason for you to base your entity in Delaware as a start-up, as you will just pay Delaware and California if you do.

Re: Foreign Qualify LLC Web Business

Rarely for a small business is it advantageous to be in Delaware vs here in Calif if you are here. Exceptions include if you know of a specific law that is different in delaware vs. here that is crucial to your business. Let me know if you want help.

Best,

Daniel Bakondi, Esq.

IMPORTANT:

No attorney-client nor confidential relationship is created through this communication. You may not rely in any way on this communication, and nothing herein constitutes legal advice nor legal opinion. Your issue may be time sensitive and may result in loss of rights if you do not obtain an attorney immediately.

Re: Foreign Qualify LLC Web Business

Rarely for a small business is it advantageous to be in Delaware vs here in Calif if you are here. Exceptions include if you know of a specific law that is different in delaware vs. here that is crucial to your business. Let me know if you want help.

Best,

Daniel Bakondi, Esq.

IMPORTANT:

No attorney-client nor confidential relationship is created through this communication. You may not rely in any way on this communication, and nothing herein constitutes legal advice nor legal opinion. Your issue may be time sensitive and may result in loss of rights if you do not obtain an attorney immediately.

Re: Foreign Qualify LLC Web Business

Rarely for a small business is it advantageous to be in Delaware vs here in Calif if you are here. Exceptions include if you know of a specific law that is different in delaware vs. here that is crucial to your business. Let me know if you want help.

Best,

Daniel Bakondi, Esq.

IMPORTANT:

No attorney-client nor confidential relationship is created through this communication. You may not rely in any way on this communication, and nothing herein constitutes legal advice nor legal opinion. Your issue may be time sensitive and may result in loss of rights if you do not obtain an attorney immediately.