Registering a Business in California but out of state – Is it Possible?  

Does your out-of-state business have to register in California? Many construction companies and contractors in California ask this question, hoping to find a way to keep their personal information away from the prying public. Who doesn’t want to avoid recourse from an upset customer?

That is exactly how our client felt. They wanted to set up and register their construction corporation (ran by them and a partner) in another state but intended to do business in California.

It seemed that this kind of set-up was their best solution, as they did not have a company address yet.  However, this is not the case.

Check out their story below and the best solution below.

Ready to Incorporate and Get Their Construction Business Operating in California

When our clients approached us, they had their names in mind and were eager to get the process going so they could start operating. We started off the process right away, gathering information, confirming the name was still available, explaining any necessary requirement for their name, and then getting their mailing and principal address for the business.

From the Information, We Could Tell Something Wasn’t Right…

That’s when we noticed the problem: the address they provided appeared to be a home address. Using your home address for your business is not wrong but most business owners don’t want their home (residential) address visible to the public and connected to their business. One bad client interaction or angry customer and you could be looking at harassment and threatening at home. No one wants to put their household, security, and/or family in that situation 

So, we reached out to him to confirm before continuing. Turns out, it was his home address. So why would he list his home address?  

He and his business partner did not yet have a business address yet, and so were opting to use their home address in the meantime. They were under the impression that the company could be set up in Delaware (out of state where that disclosure is not necessary) and then all their information associated with the company—including their address–could be private since it doesn’t have to follow California laws. 

Is it possible to register outside of the state where you want to operate your business?  

In short, yes! You can register outside of the state you want to operate in. But each state has different laws about whether you will still be required to register in a state to operate. And so many lawyers will agree that you can.  

Many business owners, especially in the construction field, want anonymity even if they aren’t using a residential or home address. For our client, registering his business in Delaware and operating in California seemed like the perfect idea for anonymity. If they can find a way to register out of state, and then have their information associated with the company hidden—that’s the perfect solution!  

But this was going to not only be a waste of time, but also a waste of money for them.

 

Recourse? Delaware Business Registration Looked Like a Solution… 

Delaware appears to be a good place to register your business because the state’s law does not require businesses to disclose the business owners’ personal information.  

This gave our client the impression that his team could set up their business in there, where all their company-related information would be kept private. 

The Problem: California Business Registration is Required for Businesses Operating in the State 

The problem is California law requires businesses to disclose the business address and partner names (if you have any). And if this is the case, registering out of state would be pointless: you will have to register your business in California, where you want to operate.  

As mandated by California law, a professional construction contractor corporation must be licensed in California and follow the professional corporation rules in California to operate. They may also have to register as a Foreign LLC or Foreign Corporation, which entails lengthy procedures.  

 

What Does This Mean? More Work for Twice the Cost AND No Anonymity 

By registering the business in Delaware and California, the client would have to pay the registration fees AND taxes in both states. Furthermore, all their business information would still be required to be made public. This means paying twice for nothing!  

Solution: Find a Different Business Address 

As our client did not have a proper business address yet, he was expecting that he would go through a long and complicated process solving it.  

This is where Incorporation Attorney came in. We provided a quick solution by advising the client to find a business address that they would not mind making public. As soon as they found one, we can start the business registration process.  

Additional Requirement for Their Business: Is A California Contractor Required to Form a Professional Corporation?

There was also a secondary level of complication: the client wanted to operate a construction company in California. In other states, this could just be an LLC. California, on the other hand, has different business entity requirements for construction corporations. 

If he is to register his business, there’s one question: Is a California contractor required to form a professional corporation? 

Construction contractor companies with three or more shareholders must form a professional corporation. Businesses with less than three shareholders may register as a corporation. Construction businesses can also be registered as a sole proprietorship, partnership, or LLC (limited liability company). 

If you are uncertain if your situation requires you to form a professional corporation, it is best to look directly at the laws with an attorney. 

Hiring an Attorney is Always the Best Way to Start a Business in California 

Like our client, many entrepreneurs who want to keep their personal information private also ask the same question: Does out-of-state businesses have to register in California while registered in a state where public disclosure isn’t required?  

There are reasons why the California law decrees business owners to make their business information public. And contractors have to abide by the rules to operate legally in this state. These rules and regulations related to setting up a business can be complex for start-ups that are still in the incorporation stage. Business laws have always been confusing to new business owners. Alone, you will not be able to understand each of them, and this is what makes business attorneys a valuable partner in your business journey.  

We, at Incorporation Attorney, are your business partners. Our reliable team of business lawyers has your best interest at heart, and we will make sure to help you with legal matters throughout the setup process. And because we are experts in California business laws, our list of services goes beyond incorporation.  

Incorporation Attorney would love to know how we can help you. Give us a call today and let’s get down to business.