You have a Wyoming LLC, a laptop, and a one-bedroom in San Diego. The work happens wherever you are, which is California. Someone told you that as long as the LLC is registered in Wyoming and you do not have a California office or California customers, the state has no claim on you. So you never registered, and you have been telling yourself the line between "living in California" and "doing business in California" is one you have not crossed.
It is worth knowing where that line actually is, because California draws it in a place that surprises people, and getting it wrong is not a small mistake. It means back taxes, penalties, and an LLC that cannot defend itself in California courts. This page is about one question: does California consider your out-of-state LLC to be doing business here, and if it does, what you are required to do about it.
Most of the confusion online comes from blending three separate questions into one. They have different triggers and different agencies, and you can be caught by one while safely under another.
The first is the Secretary of State's registration test: are you transacting intrastate business, which means you must register your out-of-state LLC as a foreign LLC. The second is the Franchise Tax Board's doing-business test: do you owe the $800 franchise tax, the additional fee, and a California return. The third is the sales-tax nexus test run by a different agency, which decides whether you must collect sales tax, and it has its own separate dollar figure. This page is about the first two, the ones that decide whether you register and whether you owe the franchise tax. The sales-tax question is a different animal with a different number and is not what triggers the $800.
The economic thresholds get all the attention, so people assume they are safe until they cross one. They are not. Under Revenue and Taxation Code section 23101, an LLC is doing business in California if it is actively engaging in any transaction for the purpose of financial gain within California, or if it crosses one of the factor thresholds. The word "or" is doing a lot of work there.
Here is what that means in practice. If you live in California and run your LLC from here, you are actively engaging in transactions for profit within California, and you are doing business here, full stop. It does not matter that your revenue is small, that your customers are all out of state, or that the LLC is registered in Wyoming. The Franchise Tax Board has taken exactly this position: an out-of-state entity whose people are working from inside California is doing business in California even when its California property, payroll, and sales are all below the thresholds. The thresholds are a floor for out-of-state companies with no California presence, not a shield for someone operating from a California living room.
If you live in California and run the business from here, the dollar thresholds below are not your question. You are doing business in California because you are operating from California, so you owe the $800 and you were supposed to register. The thresholds matter mainly if you are outside California and selling in.
If you have no California presence and the question is whether your sales into the state are enough to create an obligation, this is where the numbers matter. You are doing business in California if any single one of these is true. Not all three. Any one.
| Factor | You are doing business if you exceed |
|---|---|
| California sales | $757,070, or 25% of total sales, whichever is less |
| California property | $75,707, or 25% of total property, whichever is less |
| California payroll | $75,707, or 25% of total payroll, whichever is less |
These are the most recently published figures. The Franchise Tax Board adjusts them upward for inflation each year, so the current-year amounts may be slightly higher. Confirm on the Franchise Tax Board's "Doing Business in California" page before relying on a specific number. The "25% of total, whichever is less" rule matters: a small company doing most of its business in California can cross the line well under the dollar figure.
One trap inside the numbers. The 25% test means the dollar amount is a ceiling, not a floor. If California is 40% of your total sales, you can be doing business here on a fraction of $757,070, because 25% of your total is the lower number. Small businesses concentrated in California hit this more often than they expect.
If you are doing business in California, two obligations follow. You register your out-of-state LLC with the Secretary of State as a foreign LLC, and you pay the Franchise Tax Board the $800 minimum tax plus a return. People sometimes do one and forget the other. Registering with the Secretary of State does not settle your tax account, and paying the tax does not register your entity. You generally need both, and the registration requires a California registered agent before you can file it.
If you are already over the line and have not done either, our guide to the $800 California franchise tax and the penalties for ignoring it covers what you owe and what accrues while you wait. The Wyoming to California and Delaware to California guides walk through the actual registration filing for the two most common out-of-state cases.
The old bet was that a small out-of-state LLC would slip through. That bet has gotten worse every year. The Franchise Tax Board now cross-references federal partnership returns, 1099 data from California payers, and business registration records from other states to flag entities that look like they have California activity but no California filing. Practitioners who track this describe the discovery rate as having climbed sharply in recent years, and for an LLC with steady California revenue, the odds of being found are no longer comfortable.
The reason this matters is timing. When California finds you rather than the other way around, the tax is not the only bill. It comes with the back years, the penalties, the interest, and, if you are unregistered, the loss of your right to bring a lawsuit in California courts until you fix it. Registering before that letter arrives converts an open-ended liability into a known, fixed annual cost.
I live in California but my LLC is registered in Wyoming and has no California customers. Am I doing business in California? Yes. Running the business from California is itself doing business in California under the "actively engaging in transactions" standard. The Wyoming registration and the out-of-state customers do not change that. You owe the $800 and were supposed to register as a foreign LLC.
My California sales are under $757,070. Am I in the clear? Only if you also have no California presence and are not otherwise actively engaging in business here. The dollar threshold is one way to trigger doing-business status, not the only way. An out-of-state company with an employee or the owner working in California can be doing business here on sales well below that figure.
Is the sales-tax number the same as the franchise-tax number? No, and conflating them is a common mistake. The sales-tax economic nexus figure is set and enforced by a different agency and decides whether you collect sales tax. It does not determine whether you owe the $800 franchise tax or must register as a foreign LLC. Those run on the doing-business test described here.
What if I only hold a passive interest, like being a member of a California LLC? That can be enough to create a filing obligation on its own, and it is genuinely fact-specific. A purely passive interest may not always rise to doing business, but California often treats a membership interest in a California LLC as doing business. This is a case to run past a CPA rather than guess.
If I register now, do I owe the back years? If you were doing business in California in prior years without registering or paying, those years' tax generally does not disappear because you register today. Registering stops the exposure from growing and restores your standing going forward. How the prior years are handled is worth a conversation with a tax professional, and California has voluntary-disclosure options for exactly this situation.
The question is not really whether your sales hit a number. For most people reading this, the answer is simpler and arrives sooner: if you operate the LLC from California, you are doing business in California, and the state's threshold tables are beside the point. If you are outside California and selling in, then the factor thresholds decide it, with the 25% rule catching more small businesses than the headline dollar figure suggests.
Either way, if the answer is yes, the move is to register as a foreign LLC and get current, before an automated match at the Franchise Tax Board makes the decision for you. Registration starts with naming a California registered agent, which is the one piece you cannot file without.
California will not accept your foreign LLC registration without a registered agent that has a physical address in the state. Northwest provides one in all 50 states, prepares the registration filing for you in most, and keeps your own address off the public record. $125/yr flat, no renewal increase.
Get Northwest Registered Agent ↗What the $800 tax costs, when it is due, and the penalty for ignoring it.
The full foreign qualification filing, step by step, for your home state.
This guide reflects California Revenue and Taxation Code section 23101 and Franchise Tax Board guidance as of 2026. Thresholds are adjusted annually and your specific obligations depend on your facts. This is not tax or legal advice, and whether you are doing business in California can turn on details not covered here. Confirm current thresholds with the Franchise Tax Board and consult a CPA for your situation. Some links on this page are affiliate links.