Q: Are we required to register as a business in the state of California?
We are a Delaware C-Corp that does online retail sales. We hired one employee in California to do some marketing work for us. Does this constitute as doing business in the state of CA and require us to register with the Secretary of State?
A: Given the facts stated, I believe there is little question that the law requires you to qualify to do business in California. While I do not recommend that anyone breaks the law or even ignores it, it is important to note that the major sanction for failing to qualify, is that you will not be permitted to make use of our Court System.
If the state discovers you are doing business, they can force you to comply or cease and desist. If you fail to comply you could face problems.
Typically, the issue arises when your company is sued. You will not be permitted to defend yourself in Court until you have complied, but that only requires filing the papers and paying any back taxes owed. Once done, all is forgiven and you may proceed as if you had qualified in the first place.
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