| As the web grows exponentially, it is easier than ever | | | | state and the willingness of the entity to evade filing |
| to do business across the country with the click of a | | | | with the state. |
| mouse. For corporations, this can lead to all kinds of | | | | 2. Criminal Charges - Yes, the corporation can be |
| legal problems, particularly in California. | | | | pursued criminally. Fortunately, the charge is a |
| Corporate law is controlled for the most part by state | | | | misdemeanor and the penalty is usually a nominal fine. |
| law. As a result, states view a corporation formed in | | | | 3. Not Standing - The offending corporation can be |
| another state and doing business in theirs as "foreign | | | | barred from filing lawsuits in the state until it complies |
| corporations." Many people mistakenly believe the | | | | with the necessary foreign corporation filings and pays |
| foreign designation refers to overseas when it does | | | | all fees and taxes required by the state. |
| not. If you are deemed to be a foreign corporation | | | | 4. Agents Liability - Agents who conduct business on |
| doing business in a state, you can be subject to legal | | | | behalf of the corporation in California can be fined or |
| and tax ramifications. | | | | jailed for a year. |
| California is one state that is very aggressive in this | | | | 5. Void Contracts - All contracts can be voided by |
| regard because many businesses in the state try to | | | | California courts. |
| get around taxes by forming in Nevada. A veritable | | | | Most corporations that are attacked in regard to the |
| horde of legal tests have been put together to | | | | above are not randomly selected. Instead, the issue |
| determine whether such approaches will fly or not. At | | | | arises when a dispute with another party comes to |
| the end of the day, however, California usually gets its | | | | the forefront. Still, it can be damaging. The only real |
| piece of the pie. | | | | remedy the corporation has is to pay all fines and |
| If you are determined to be a foreign corporation | | | | penalties. It then must file all back taxes and tax |
| conducting business in California without properly filing | | | | returns to get into good standing. |
| notice with the state [and paying taxes], there are five | | | | If you run a business that is doing more and more |
| basic penalties. | | | | business in California, it makes sense to take steps to |
| 1. You can be assigned a per diem penalty. This is a | | | | determine if you should be registered as a foreign |
| daily penalty amount. A court determines it after an | | | | corporation in the state. Failure to do so can lead to |
| action is brought by the attorney general of the state. | | | | administrative and financial difficulties that can severely |
| Issues argued in front of the judge will include the size | | | | tie down and damage a business. |
| of the corporation, the amount of business done in the | | | | |