Incorporated in Nevada, located or doing business in California

It’s a common late-night ad: Incorporate your business in Nevada, and avoid state taxes. But is it true? No, it’s not.


Corporations which do business in California are required to register in California. Doing so subjects the corporation to California’s $800 Minimum Tax (see Revenue & Taxation Code Sections Section 18601, et.seq.; R&TC Section 23153). Failure to pay the minimum tax will result in penalties and interest being applied, though fortunately the Ralite case will generally limit liability to the company (generally; each case needs to be separately evaluated). The FTB can also have the corporation suspended.

If the company fails to pay the annual $20 ($25 if paid online) Statement of Information Fee, then the Secretary of State will suspend the corporation and impose a fine of $225, bringing the balance to reinstate to $250. But wait…there’s more. Since the Secretary of State doesn’t do its own collections, they have to farm it out – to the FTB, who adds another $298 ‘collection fee,’ bringing the total due to $548. Per year. Miss 3 years (because you missed the first, and never got around to the others), and you’re up to $1600. Instead of $75. Chew on that.

And there’s still more. Suspension means that contracts entered into during the period of suspension are voidable at the other party’s option; you’ll need a certificate of revivor to prevent that, and you don’t get one until you’re reinstated. Suspended corporations can’t bring an action in California courts, nor can they defend one (the court will usually suspend the case to allow you to get current, but not forever).

If you have a corporation that was formed outside of California, but either doing business or located in California and have received a notice from the Franchise Tax Board asking for a tax return for your out-of-state corporation or LLC, call us at (818) 480-3280 to schedule an appointment to discuss your options. DO NOT DELAY – time is limited to respond to the FTB, and the penalties for not responding can be severe.

Even if you have not received a notice from the FTB, if you formed your business (corporation, LLC or partnership) in another state, and either of the following apply to you, contact us:

  •  A member or partner (or, in a close corporation, a shareholder) lives in California.
  • The Corporation, Partnership or LLC has assets in, does business in, or otherwise earns money in California.


If you’re not sure if you’re doing business in California, contact us to schedule an appointment to review your situation.