According to California Franchise Board website, a business needs to register as a foreign entity if they engage in “repeated and successive transactions” within the state.
I work as a consultant and have a potential contract coming through that’s within the state of California. It would be one client only, possibly up to 2 or 3 years in length. They’d pay me monthly and 1099 me at the end of the year.
As far as the State of California knows, it’s one single payment, since the 1099 just lists total amounts. Although I’m not sure if it mattered if I got paid daily, weekly, monthly, or once per year, if that would make a difference in needing to be a foreign business entity.
I plan to register a New Mexico LLC for business use in California because I don’t want the state to have my real name on file because I don’t want them trying to claim I’m a California resident and taxing me retroactively on everything for years past. There’s a chance I may move to California in several years and I’m afraid of my name going into their system and then in a few years saying “nope, you were a resident since 2018 so go back and pay us taxes for everything”
I know I could easily prove I wasn’t a resident of California. I have a lease out of state. For this contract I’d be spending maybe only a few weeks each year in California total over the course of each year with airplane ticket receipts. However, f— California and I don’t want to have to deal with them coming after me and hiring a lawyer. Far easier to register a New Mexico LLC, pay the actual taxes I owe them, and dissolving the entity when the contract is up. Not trying to avoid actual taxation, just trying to avoid additional taxation.
California and NY are two states I refuse to do business with in my real name or in an entity that has my real name because they have aggressively gone after people charging them backtaxes and penalties claiming they’ve been residents for years.
I assume I can have New Mexico LLC do business in California with the one client, not be considered “repeated and successive business” since it’s one client, and no where on the tax return do I need to give my real name. Just the EIN of the New Mexico LLC. But this is just an assumption.
I’m not trying to avoid paying any taxes I actually owe, I’m trying to avoid them claiming I owe more than I do.