Foreign Corporation
Foreign Corporation
- A Foreign Corporation is a company that was incorporated out of the
state or the country in question and is transacting intrastate business in this
state. For example, your foreign corporation must qualify to do business in
California with its Secretary of State's Office, if pursuant to California
Corporations Code Section 191 your foreign corporation is transacting intrastate
business. Section 191 defines transacting intrastate business as entering into
repeated and successive transactions of a corporation's business in this
state, other than interstate or foreign commerce. If a law such as Section 191
seems vague to you, then consult your business attorney. As with a corporate dissolution,
a foreign corporation cannot just cease operations in California
without further liability. After obtaining written clearance from the California
Franchise Tax Board that your company owes no outstanding franchise taxes, you
must file a Certificate of Surrender with the Secretary of State's Office. This
Certificate must comply with the explicit requirements stated in the California
Corporations Code Section 2112.
If you are thinking about skipping the whole process because, after all, you are located in a different state, think again. There are penalties for failure to qualify as a foreign corporation when transacting business in another state. Besides tax penalties for unpaid tax liabilities (foreign corporation fees, franchise taxes, corporate income taxes, sales taxes, etc.) you can lose the right to file or to defend a lawsuit in the state in which you failed to qualify.
Disclaimer: The foregoing is intended to provide general information and may not be suitable in specific instances. The glossary information is not intended to be exhaustive, but rather to illustrate typical considerations. The material is provided with the understanding that it is not legal, accounting, tax or any other professional advice.
If you are thinking about skipping the whole process because, after all, you are located in a different state, think again. There are penalties for failure to qualify as a foreign corporation when transacting business in another state. Besides tax penalties for unpaid tax liabilities (foreign corporation fees, franchise taxes, corporate income taxes, sales taxes, etc.) you can lose the right to file or to defend a lawsuit in the state in which you failed to qualify.
Disclaimer: The foregoing is intended to provide general information and may not be suitable in specific instances. The glossary information is not intended to be exhaustive, but rather to illustrate typical considerations. The material is provided with the understanding that it is not legal, accounting, tax or any other professional advice.
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