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Do we register a foreign LLC or do we set up a separate LLC to do business in California?

Los Angeles, CA |

We are two fashion designers who are going to run a fashion label together. One of us is a Finish citizen living in Helsinki and one of us is a Swedish citizen but lives in Los Angeles (had a green card for two years and will have double citizenship asap). We have registered our business as a Ltd in Finland. How do we go about doing business in CA? Do we register the foreign business here or do we start up a whole new LLC here? OR is it enough that I have registered in CA as a freelancer receiving out-of-state and foreign income?

Attorney Answers 4

  1. Best answer

    I have helped dozens of foreign clients bring their businesses to the US and have blogged extensively about the issues that they face (I recommend that you start at the page at the link below).

    You can register the foreign entity to do business in CA (sometimes referred to as a "branch office").

    However, in my experience almost all foreign clients form a new entity (corporation or LLC) here for either or both of the following reasons:
    - To serve as a legal firewall, keeping any liabilities or obligations in the US and away from the existing overseas entity (legal issue).
    - In some circumstances, a US entity can sell to US customers more successfully than a foreign entity can (marketing issue).

    This information does not constitute legal advice and does not establish an attorney-client relationship.

  2. To do business in the State of California, your Finnish Ltd would have to register as a CA business entity.

  3. You should review both the legal and tax liability issues with an attorney like Attorney Shultz who can advise you on the best courses of action such as organizing or qualifying the applicable entity You should also get some tax advice on any tax liability issues involved with each of the potential courses of action.

    On the legal side, you are correct that you will need to either qualify your existing entity as a foreign entity operating in California or organize a new entity (e.g., New Entity USA, LLC) in California. Organizing a new entity in California will probably be the simplest course of action and give your existing Ltd. some additional liability protection, because the Ltd. will either have ownership in the new entity or be completely separate from the new entity if you and your partner own the new entity as individuals.

    However, you should retain an attorney who can provide a legal opinion on the best course of action given your specific facts and circumstances.

    The foregoing response is provided for general informational purposes only and is not a solicitation for business. Please retain an attorney if you need specific legal advice. No attorney-client relationship is established until both you and me agree to establish one, and neither transmission of information herein, nor the receipt of such information, constitutes an agreement to establish an attorney-client relationship.

  4. Tervetuloa! It would be prudent for you to form an entity and conduct business using that entity for many reasons including, but not limited to, limitation of liability, tax benefits, defining roles and responsibilities of the partners, and credibility with vendors. The decision whether to foreign qualify your Finnish entity here in California or simply form a new LLC which can either be wholly-owned by the Finnish LTD or by each of you individually is somewhat complicated and implicates both legal and international tax analysis.

    Uri Litvak

    This response shall neither be deemed to create an attorney-client relationship nor constitute legal advice but rather is intended to provide general information about a complex legal issue.

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