Foreign LLC - Registration With CA SOS? - Spidell

Foreign LLC – Registration With CA SOS?

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Message Board Foreign LLC – Registration With CA SOS?

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    • #275053
      Fred Siegel
      Participant

      NYS LLC treated as a partnership, created as a single purpose company to make a single movie, which the LLC owns.  Other than making and seeking to sell the movie, LLC will not have any other activity.  The movie was made in NYS and other parts of the world and was completed in early 2019.  LLC had no activity regarding production of the movie in CA, with the exception of a one day interview of a subject in the movie in 2018 in Los Angeles.

      The sale of the movie was negotiated in late 2018 by a third party located in Los Angeles, and the movie was delivered digitally in early 2019 by the LLC in NY to the purchaser who is located in Los Angeles.  The purchaser bought the movie outright (i.e., obtained all rights);  the LLC is not entitled to any future contingent payments based on the success of the film.  The sales price exceeded $602,000.  For tax purposes, the LLC is treated as doing business, will file the Form 568, pay the annual LLC tax and annual LLC fee, and source net income to CA.  There are 6 partners, individuals and companies, and none of which are residents of or located in CA.

      As LLC will not have any activity in or connection to CA beyond the year the LLC delivered the film and recognized CA source revenue, i.e., 2019, the LLC would like to file an initial and final tax return with CA for the same year.

      LLC is trying to determine if it needs to register (or should have already registered) with the CA SOS.  The standard for “doing business” appears to be very low for tax purposes, but not so low for LLC law purposes:

      CA Revised Uniform LLC Act, Article 8, Foreign LLCs, 17708.03. (a) “A foreign limited liability company that enters into repeated and successive transactions of business in this state, other than in interstate or foreign commerce, is considered to be transacting intrastate business in this state within the meaning of this article.  (b) Without excluding other activities that may not be considered to be transacting intrastate business in this state within the meaning of this article, activities of a foreign limited liability company that do not constitute transacting intrastate business in this state include all of the following: … (5) Selling through independent contractors.  (6) Soliciting or procuring orders, whether by mail or electronic means or through employees or agents or otherwise, if the orders require acceptance outside this state before they become contracts.  (9) Conducting an isolated transaction that is completed within 180 days and is not in the course of a number of repeated transactions of a like nature.  (10) Transacting business in interstate commerce.”

      This appears to be far more lenient that tax law and the FTB.  Is the LLC required to register with the CA SOS, or can it just file an initial and final return for 2019 with the FTB?

      Fred Siegel, CPA
      NYC

    • #275138
      Sandy Weiner
      Participant

      You are correct, the threshold for “doing business” is lower than the “transacting” intrastate business.  From what you’ve said, it sounds as though registration would not be required.

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