As I discussed in this earlier post, “transacting intrastate business” is not the same as “doing business” in this state. Foreign corporations and limited liability companies must register with the Secretary of State if they transact intrastate business. Even though foreign corporations and LLCs are not transacting intrastate business in California, they may be considered to be doing business here. The Corporations Code defines and uses the phrase ”transact intrastate business” (Sections 191 and 17001(a)) while the Revenue and Taxation Code defines and uses phrase “doing business” (Section 23101(a)).

Previously, California imposed a $2,000 per taxable year penalty for failure to file a return on a foreign corporation that failed to qualify to do business in California, or any corporation whose powers, rights or privileges have been forfeited or suspended, and that is doing business in California (unless the failure to file is due to reasonable cause). Cal. Rev. & Tax Code § 19135. Limited Liability Companies were not subject to this penalty. Late in last year’s session Assembly Member Skinner amended AB 318 to extend this penalty to both foreign and domestic LLCs. The Franchise Tax Board estimates that this will add an additional $400,000 this fiscal year to the state’s coffers.