I set up a Wyoming LLC last year because I wanted to keep my address off public records. I live in California and run a small online business. I just got a letter from the California Secretary of State saying I need to register as a foreign LLC and pay the $800 franchise tax. I thought forming in Wyoming would shield me from this. Did I misunderstand how this works? What happens if I ignore the letter?
LLC compliance
I formed a Wyoming LLC for privacy but my home state still wants paperwork
You misunderstood. A Wyoming LLC only protects your privacy in Wyoming. If you're doing business in California, you have to register there too. The $800 is the minimum franchise tax, and it's due every year. Ignoring the oetter will lead to penalties and possibly your LLC being suspended in California.
Yeah, physical presence or economic nexus triggers registration. If you're running the business from your home in CA, you're definitely doing business there. The Wyoming privacy only works if you have no real connection to another state, which isn't your case.
So basically you wasted money on Wyoming. Should've just formed in California and used a registered agent for privacy. Now you're stuck with two sets of fees.
I get that now. But what if I just dissolve the Wyoming LLC and form a new one in California? Would that avoid the foreign registration requirement? Or is it too late because I already operated as a Wyoming LLC in California?
You can dissolve the Wyoming LLC, but California will still want its pound of flesh for the period you were operating. The FTB can assess taxes for prior years. Better to register now and comply.
I went through this exact situation. Formed in Wyoming, live in California. I ended up registering as a foreign LLC and paying the $800. It sucks but it's the law. The privacy benefit is minimal anyway because California requires you to list a principal office address, which becomes public.
What about using a virtual office or registered agent address in California? That might keep your home address private while satisfying the requirement.
A registered agent address is public, but it's not your home. However, California also requires a statement of information with the street address of the principal office. You can use a virtual office for that, but some virtual offices won't accept legal mail. You have to check.
Honestly, the $800 is just the tip. You also have to file an annual report and pay $20. And if you you ignore the letter, they'll add penalties and interest. Not worth it.
I'm curious, did you use a formation service like Northwest or ZenBusiness? They often push Wyoming for privacy but don't warn about foreign registration. It's a common trap.
I used a service called Incfile. They didn't mention anything about California requirements. I guess I should have done more research. So my next step is to just register and pay, right? Any tips on how to minimize the damagse?
Register as a foreign LLC, pay the $800, and file your statement of information. Then keep up with annual filings. Also, consider whether the Wyoming LLC is still worth keeping. You'll have to pay Wyoming annual report fees too ($60 minimum). Might be simpler to just have one California LLC.
One more thing: the $800 is due for the year you register, and it's not prorated. So if you register now, you'll owe the full $800 for this year. And next year's $800 is due by April 15th. So budget for that.
Also, if you ignore the letter, they can suspend your LLC's ability to do business in California, and you'll be personally liable for debts. Don't ignore it.