Steps to Form a California Company as a Foreigner
If you are an entrepreneur thinking if it is possible to start a company in California as a foreigner then the answer is yes. The second most important aspect is restrictions and California does not impose any kind of restrictions on entrepreneurs or startups registered in the state. It is important to note that the regulations and documents required to register a California business as a non-US resident would be quite similar to that of a foreign company. Let’s take a look at the various processes and steps that you need to take to successfully establish your business as a foreigner in California.
1. Prepare your California business plan
Every business needs a plan before they can actually start a business in California and this holds true for non-US resident entrepreneurs and business owners. A strong business plan can take a new business towards success and a weak business plan can lead to bottlenecks and problems. A business plan is essentially a business roadmap that contains the primary and secondary business objectives as well as strategies.
A business plan provides a long view of where your company is, where it is expected to go, and how it will get to that point. This type of business roadmap provides a bird’s eye view of several aspects like the capacity (time and resources) of each team, individual contributions, fundraising, growth-related initiatives, infrastructure and improvements among others. What does a strong business plan entail? If you want to register a California business as a foreigner then a business plan should focus on the following areas:
- Vision and Mission Statement
- Executive Summary
- Company Description
- Long-Term Goals
- SWOT Analysis
- Competition and Market Analysis
- Breakdown of Products and Services
- Marketing Plan and Sales Strategy
- Financial Projections and Funding
2. Secure business funding
If you are planning to start a company in California as a foreigner then there may be higher initial costs depending on the type of business activity like an IT firm will need investments in tech equipment. The thumb rule is that it will cost money to start any type of business and the expenses include cost of registration or incorporation in the state along with obtaining licenses and permits.
Securing funding is one of the most important and key financial choices that you will have to make as a foreign or non-US resident entrepreneur. It is important to note that the funding opportunities chosen will affect the structure and the operations of the business. Some of the funding opportunities that you can benefit from before you register a California business are:
3. Choose a company name
A business name is as important to your business as are your customers because a customer can relate your business name to the product or services offered by your company. In a way, a business name can help in creating an excellent first impression hence it is important to choose the right name before you start a company in California as a foreigner. When choosing a business name, it is essential to ensure it is unique but not a tongue twister.
Once you have chosen a name, it is recommended that you search for name availability in the California SOS database. According to the California Secretary of State, you will need to reserve the chosen name for a period of 60 days and should be distinguishable in the records from any other business name. Since you are planning to register a California business as a foreigner or non-resident, you will have to register the business name in compliance with California Corporations Code Section 2101.
4. Choose a business entity
If you have decided to start a business in California as a non-resident or foreigner then the primary consideration should be the type of business entity you want to form. The different types of entity you can form in California include:
The type of entity you want to register as a California business will depend on your specific requirements and what you are planning to achieve. Each type of business has its advantages and disadvantages, risk areas, and rewards. Some of the factors that will help you to choose the right entity include:
- Cost of new business formation or start up costs
- Continuity and Transferability
- Liability and Asset protection
- Sharing of profits
5. Choose a Registered Agent
One of the primary requirements in the state of California for new businesses is hiring registered agent services. This is especially true if you plan to start a company in California as a foreigner. If you were to form a foreign corporation then it is mandatory to designate a registered agent for the service of process pursuant to CA Corp Code § 2102 and 2111 (2019). A California registered agent is also known as an agent for service of process and is appointed by a company mainly for the purpose of accepting all types of official correspondence and legal notices. A registered agent like IncParadise will not only handle service of process but can help you register a California business and also provide other business related services. IncParadise is one of the leading registered agent service providers in California today!
6. Register your company with California Secretary of State
There are several processes that you have to undergo in order to start a company in California as a foreigner. The first and foremost is registration of your business with the California Secretary of State. If you are a non-resident planning to register a California business then you will need to apply for foreign qualification. The type of registration will be dependent on the type of entity.
Entities like foreign corporations will be required to file a certificate of qualification pursuant to CA Corp Code § 2106 (2019) while foreign LLCs will need to file a certificate of registration with the Secretary of State pursuant to CA Corp Code § 17708.02 (2019). IncParadise, one of the top registered agents in California can help you with the process and filing your California company registration. You can order new LLC or INC online right here – right now and thus save valuable time.
Planning to start your new business in California?
7. Get EIN
If you are a Non-U.S. citizen and are planning to start a company in California as a foreigner then you will need to apply for and obtain an Employer Identification Number (EIN) without the need to have a Social Security Number (SSN). The EIN is a 9-digit unique identification number and is also known as a Federal Tax Identification Number (FEIN). You have to apply for the EIN with the Internal Revenue Service (IRS) and have to obtain it before you register a California business as a non-US resident. Since you will be incorporating or forming your new business in the US; EIN can be applied for online.
8. Open a bank account for your business
It is always recommended to open a business bank account if you are planning to start a business in California as a non-resident. A business bank account also known as a Business Checking Account will keep your business income and expenditure separate from personal income and expenses. This will also help you to manage expenses and file taxes. You can refer to our bank account opening guide to understand how business banking works in California or the U.S.
Each bank has its own USP and advantages like some banks offer night depository services and a minimum opening balance of just $100. Each bank also has their own set of requirements but some of the common documentation required by Non-US residents for a business bank account includes:
- Certificate of qualification or registration
- Federal Tax ID Number (EIN)
- Proof of address
- Photo ID (such as a valid passport)
- Copy of the Business License
9. Obtain necessary business licenses and permits
You can start a company in California as a foreigner in a variety of sectors but you will need to obtain a business license or permit first. Applying for and obtaining a business license basically means that you have the permission to operate your business or transact in the state of California. There is no separate requirement for non-US residents when applying for a business license except that you may require a single or multiple licenses depending on your business activity and location. Once you register a California business, you can apply for any of the following licenses:
- A general business license
- Business license/permits for specific industries
- County business licenses
You can also opt for our “Business License Research Report” service, which is an in-depth informative report that contains a list of filing instructions, license types, supporting documents required, and fees for business licenses and permits in California.
10. Know about the annual and ongoing state filing requirements
Once you start a business in California as a non-US resident, you will need to maintain it and ensure all annual requirements are met. This will help in keeping your business status active while helping you avoid any penalties or fines for non-compliance or late filings. Different types of business entities have different annual and ongoing requirements and some of them are:
- Name registration renewals
- California business license or permit renewals
- Statement of Information – Initial and Biennial
- Franchise tax
- State Business Tax
- State Employer Taxes