California Shelf companies vs Out of state shelf companies filed in California

Why not obtain a shelf company made in California? You're better off with a foreign (out-of-state) shelf company. Then file it into California. Read below to learn why this is the case.

Reason #1: The seller of the shelf company has the responsibility of delivering a company that's free from liabilities, back taxes and other problems. California shelf companies are troublesome because of the expected fees from the CA Franchise Tax Board that the seller fails to pay. You're on the hook for those back fees after you buy the company.

Remember, the CA Franchise Tax Board seeks to tax any CA company at least $800 per year starting on the anniversary month. If your company was incorporated in July, then the CAFTB seeks their $800 annually in July.

If you buy a California shelf company, then the seller probably didn't pay the annual $800 fee to the CAFTB. After you buy the CA shelf company, you'll need to file and pay the CAFTB $800 for multiple years since the company is aged. Don't forget the penalties and interest. Why? The seller didn't register and pay. If he did, you'd pay an astronomical price for that CA shelf company. The seller wants to recoup fees and sell the company at a profit.

The solution? Acquire an aged shelf company outside California and then file it into CA as a foreign company. Then register with the CAFTB. You won't be charged in arrears since the company hasn't yet done business in CA until now. You're safer with a shelf company from New Mexico or Montana filed into California as a foreign corporation or LLC.

Reason #2. CA collects ownership information on the business through the business licenses on the county and municipal level. This is another reason why a California shelf company isn't a good idea. Most sellers of California aged shelf companies didn't file those business licenses. This means you're in arrears after acquiring the company on the county and municipal level. And we know how California loves their late fees.

Reason #3: California collects information on stockholders on the state or local level (business license). A change of ownership usually translates into resetting the age of the company to "new company" status-- even though it may be several years old. Bankers consider companies as "new" when the stockholders change. As for states such as Montana, Wyoming and New Mexico; stockholder data is not collected. Therefore, the transfer of ownership is not transparent on the public record (when we sell you the company). When you file the company in CA, you are considered the first owner of the company and the age of the shelf company is retained.

3. File the shelf company in the state of California as a foreign corporation, file the county and municipal business licenses. We'll update the shelf company Director and Officers according to your specified instructions. The bank will be glad to see that the Secretary of State information matches between California and where the company was originally filed. Banks like to see consistency in information across reporting platforms and compliance.

Banks and financial institutions are aware that shelf companies are commonly purchased from Wyoming, Nevada and Delaware. As a result, they are more so hesitant to lend to companies from those three states. Montana and New Mexico isn't known as a state that produces shelf companies. In fact, you probably don't know anyone who has ever incorporated in Montana. That's great! For this reason, Montana shelf companies are a superior choice when building business credit. Simply file the MT company into California, and you're ready to build that strong foundation for your small business.

In whatever state you live in, a company filed in that same state is considered a domestic corporation. A corporation filed in any other state is a foreign corporation. For example, a Wyoming corporation is domestic to the state of Wyoming. But it's considered a foreign corporation in any other state. Likewise, a California corporation is domestic to the state of California. But a company filed in Delaware, Wyoming or other state is considered foreign to California.

Knowing the above, doing business in your state may require a "foreign filing" if the company was initially filed in another state.

Understand the Process of Qualifying as a Foreign Corporation in California

If your Corporation or LLC is from another state, it will be considered a Foreign Corporation or LLC.

A foreign corporation is an existing corporation that is registered to do business in a state jurisdiction other than the one where it was originally incorporated.

A domestic corporation is one that is registered in the same state of original incorporation.

Things You’ll Need:

Check to see if the name of the Corporation or LLC you are wanting to register is already in use. If your entity name is already taken, you may need to modify your entity name slightly to register in that state.

Corporations – Foreign (Out-of-State or Out-of-Country)

Foreign Corporations (Filing Tips)		Online Submissions File Online for faster response	Fillable PDF Print and submit via mail or in person	Fees * If Filing outside of required filing period, no filing fee required.
1.	Statement and Designation by Foreign Corporation - Stock	--	Form S&DC-S/N	$100.00
2.	Statement and Designation by Foreign Corporation - Professional	--	Form S&DC-PC	$100.00
3.	Statement and Designation by Foreign Corporation - Insurer	--	Form S&DC-INS	$100.00
4.	Statement and Designation by Foreign Corporation - Nonprofit	--	Form S&DC S/N	$30.00
5.	Amended Statement by Foreign Corporation	--	Form ASDC	$30.00
6.	Registered Corporate Agent for Service of Process Certificate	--	Form 1505	$30.00
7.	Statement of Information - Foreign Stock: Due within 90 days of initial registration and every year thereafter.		Form SI-550	$25.00*
7.	Statement of No Change: May be used after filing the initial Statement of Information if no changes have been made AND the Statement of Information is due.		Form SI 550NC	$25.00
8.	Resignation of Agent for Service of Process	--	Form RA-100	No Fee
9.	Corporate Disclosure Statement	--	Form SI-PT	No Fee
10.	Certificate of Surrender	--	Form SURC	No Fee
11.	Corporate Mergers (mergers between corporations only)	--	--	$100.00
12.	Interspecies Mergers (mergers between corporations & other business entities)	--	Form OBE MERGER-1	$150.00
13.	Conversions (conversion to a domestic stock corporation or other business entity - refer to conversions for the applicable conversion document/form & filing fee)	--	--	--
14.	Registration of Corporate Name by Foreign Corporation	--	--	$50.00
15.	Certificate of Cancellation of Foreign Name Registration	--	--	No Fee
16.	Substituted Service of Process (on a corporation, for each corporation named)	--	--	$50.00
17.	Name Reservations (information and name reservation request form)	--	--	$10.00
18.	Information Requests (information, fees and records order form for requesting certificates, copies and status reports)	--	--	--
19.	Special Handling & Preclearance and Expedited Filing Services (information about service options and associated fees)	--	--	--

Step 1:
Know that, since you are choosing to take advantage of all the rights and amenities of the state in which you are operating as a foreign corporation, you will be obligated to contribute to the health and wealth of that state. This may mean filing taxes and paying other fees within that state.

Corporations that organize in California, register in California, conduct business in California, or receive California source income, must file California Form 100.

The California Estimated Tax Form 100 (ES100) http://www.ftb.ca.gov/forms/2008/08_100es.pdf

The return due date is the 15th day of the third month after the close of the taxable year.

A Corporation is taxed on its net income at a rate of 8.84 percent, with a minimum tax of $800. The minimum franchise tax ($800) is due the first quarter of each accounting period and must be paid whether the corporation is active, inactive, operates at a loss, or files a return for a short period of less than 12 months. The minimum tax is waived on newly formed or qualified corporations filing an initial return for their first taxable year.

All LLCs classified as corporations that organize in California, register in California, conduct business in California, or receive California source income, must file California Form 100. The California Form 100 must be filed by the 15th day of the third month after the close of the LLC’s taxable year.

The LLC will be taxed at the corporate tax rate of 8.84 percent and will be subject to a minimum tax of $800.

All LLCs classified as partnerships or disregarded entities that organize in California, register in California, or conduct business in California, must file California Form 568 Limited Liability Company Return of Income. California Form 568 must be filed by the 15th day of the fourth month after the close of the LLC’s taxable year.

An LLC required to file Form 568 pays an annual tax of $800, and may be subject to a fee based on total annual gross worldwide income. The annual tax is due by the 15th day of the fourth month of the taxable year, and is paid using CA Form 3522.

In addition, an LLC filing Form 568 that has members that are not residents of California must file the agreements of those non-resident members acknowledging that California may tax them and may collect tax from them, agreeing to file a California return and pay tax on the members’ share of California source income of the LLC. For any non-residents that do not sign an agreement, the LLC must pay tax on the nonresidents’ share of LLC income.

Step 2:
Contact an attorney or firm who helps corporations register in foreign states to ensure that you are strictly adhering to the registration procedure.

Tips & Warnings

Private firms that will assist you in registering your entities in California

IS THIS INFORMATION CORRECT? PLEASE SEE YOUR TAX ADVISOR. CONFIRM BEFORE YOU FILE.