Legal, Tax, and Accounting July 20, 2020

Do we need to register/qualify in California?

Robin Joseph @robinjoseph08

Hi everyone!

I can't seem to find a lot of concrete requirements when it comes to this stuff, so I'm hoping I can get some recommendations based on other your experience.

My co-founder and I created a Delaware LLC for our SaaS startup in January of this year because we needed to sign some agreements early on as a legal entity. We used Stripe Atlas, and everything went pretty smoothly. This month, we received our first payment from a customer, and now we're looking at how everything is set up to ensure that it's all correct.

The biggest question we have (right now) is around whether we need to register and have Foreign Qualification in the state of California where both of us live. When searching, I seem to find some mixed signals about whether it's required or not. Some sources say that it's only required if you're doing brick-and-mortar business in the state (which we aren't), if we're hiring employees in the state (which we aren't, besides us), or if we open a bank in the state (which was done for us through Stripe Atlas). Others say that it's required if you just live in the state. So my question is what are the criteria for needing to register in California?

Any help and advice is greatly appreciated! Thanks!

  1. 1

    The short answer is yes, you need to go through foreign qualification. You are doing business in California if you either have office space in California or work from a residence within California. This article here is a nice explanation why, but it doesn't cost a lot and is better to be safe than sorry, especially because as an LLC you are more liable to individuals and organizations "piercing the corporate veil."

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