Legal Question in Business Law in California

Re: Incorporation Matters

As to question #1: If you are running the corporation from a physical location in California, you must qualify as a foreign entity doing business in California. This will subject you to the $800/year minimum franchise tax and to pay income taxes on all California derrived income.

As ot question #2: If you are truly operating an overseas corporation from an overseas location (i.e. not from your California base), there is no special license needed to sell goods and services to customers in the U.S., unless required by the particular product (such as pharmaceuticals) or service (such as legal services).

Re: Incorporation Matters

(1) My personal opinion is that all small businesses should incorporate in the state in which they have their main (or only) office. There may be advantages to incorporating in Delaware, Maine, Wyoming, Nevada or the Cayman Islands if you are a public corporation worried about hostile takeovers or stuff like that, but it makes absloutely no sense for 99%+ of small businesses to subject themselves to multiple taxation, reporting, income-allocation, etc. problems of incorporating in X and running it in Y.

All businesses, whether Web-based or not, have a physical location or principal place of business, and that is NOT determined by where it is incorporated or where its servers are. There is no one absolute test for the principal business location of a corporation; various courts in different states have used a variety of formulas based on employee head count, investment in factories and offices, where board meetings are held, where the president's office is, and on and on.

(2) Sure, California will consider you a "non-California business" because you're incorporated in Nevada. California will then require you to register as a "foreign" coporation (i.e., non-California) and pay the same taxes California corporations pay. You won't save a nickel; instead, you'll be reporting to both California and Nevada and paying taxes to both.

(3) As far as California taxes, it doesn't matter whether you're incorporated on the moon. You still have to pay California taxes if you do business here. As for taxes and license requirements in other jurisdictions, you'd have to ask an attorney licensed to practice law there.