5 Questions to Ask Before Forming a California Company
California is the land of dreamers, tech companies, media moguls, and entrepreneurship.
You've probably heard a lot about registering your company in California vs. registering it somewhere like Nevada. Here's how to decide where to register your company:
1. Do the owners work in California?
You need to register your company in the state where you run your company. If you work in California, you need to register in California. Otherwise, you'll end up paying taxes and registration fees in two states: where you work and where you're registered.
If you have owners in different states, you may have to register in one state or both. It depends on where most of your sales come from and the laws in each state. Look to your state laws to determine where you need to register.
2. Do you have a physical storefront in California?
If you have a physical storefront, you need to register your company in that state.
3. Are you selling mostly to people in California?
If you provide your products or services to people in predominantly one state, you need to register in that state.
4. Can you afford the taxes?
Each state has a different tax structure and rate. For example, California has a minimum annual tax of $800, even for businesses that don't make a profit. Is that affordable for your company?
It's fine to register your company in a state with lower taxes, like Nevada or Texas, as long as you're following the law. See tip #1 above. You have to register your company where you work. So you can't register your company in Nevada if your office is in California, unless you want to register in both states. If you want to register in Nevada alone, you'll have to move your work location to Nevada as well.
5. Do you want investors?
Investors prefer some states to others. Delaware is a popular state for companies seeking investors because it has it's own business law that is very corporate-friendly. If attracting investors is a goal of yours, consider registering in a state with beneficial laws to investors.