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Let's say that you have a small business, like a 1-man software consulting firm.

I know that if you do business in California, you have to pay its $800+ franchise tax.

Is there a similar requirement in every state? For example, if your clients are in NY, would you have to register your business, and pay taxes there?

What if, instead of a consultant, you are a seller on eBay or Amazon, and your customers are all over the U.S., do you have to register in every state, and pay something like the $800 minimum tax in each of them?

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    I'm voting to close this question as off-topic because this isn't really a personal finance question, it's a legal question related to running a business. Oct 27 '15 at 4:44
  • @NathanL, this is a question I would ask my accountant and not my lawyer so I would say this is an accounting question. It is unclear to, however, whether this site is only for personal finance or is also for accounting questions for businesses. There are certainly a lot of questions relating to the latter already here.
    – gaefan
    Oct 27 '15 at 12:52
  • @Kekito it is pretty clear if you read the FAQ Oct 27 '15 at 13:41
  • I'm voting to close this question as off-topic because it's is about company taxation instead of personal finance.
    – Dheer
    Aug 10 '17 at 0:53
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If you "do business" in a state, then you need to register your business in that state. I suspect that you have a misconception of what it means to "do business" in a state. If you are a 1-man shop, then you very likely are not doing business in any state except the one state where you work.

Examples of when you are doing business in a state include having an office in the state or having employees in the state. Merely selling something to a client in that state is NOT enough to be doing business in the state.

Each state is different, but unless you are doing something that is, in some sense, close to having an office or an employee in a state, then you have nothing to worry about. For example, if you regularly travel to a state to do work for a client then it is possible that you could be doing business in that state (I have no idea if that would be sufficient in any state). But if you are just working out of your basement running a website, then you are only doing business in your own state.

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This is an answer grounded in reality, not advice.

Most states have no means of enforcing their foreign business entity registration statutes. Some states never even codified consequences. (California is a notable exception.). Some states have 'business licenses' that you need in order to defend your entity in court, but will retroactively apply the corporate veil when you get the license.

The "do I have to register" question is analogous to asking a barber if you need a haircut. But this doesn't absolve you of looking in the mirror (doing your research).

Registration and INCOME taxes are different stories. If a state calls their fee a franchise tax and it is applicable and there are real consequences for not, then you will have to pay that tax.

Anyway, this isn't advocating breaking the law, but since it describes ignoring toothless state-chartered agencies, then there are people that will disagree with this post, despite being in line with business climate in the United States. Hope that helps

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