Situation. A company is incorporated in the British Virgin Islands.
The corporation maintains no physical presence in the US. They do
maintain a US address and phone number. These communications are
forwarded to the corporation overseas.

This corporation wishes to conduct a mail order campaign in the US.
Customers will send payment to mail forwarder in the US who will send
it on to the coproation. Payment will be processed overseas. Customers
will also pay online. Product will be shipped to a mail forwarder in
the US to be delivered to US customers.

Is the BVI corporation required to obtain a license to conduct the
mail order activities in the US? If so, what license and where can it
be obtained?

Dear Silverstreet

The company is doing business in the US. 

So, to determine what licenses you need, you'll need to 
look up the requirements of the state and city where the 
company has its mailing address. 

To all your customers, you appear to be located in the state
where the mail forwarder is located. 

Use this tool at Bankrate.com to find out about your local
licensing requirements. Just click on your state.  
http://www.bankrate.com/brm/news/biz/Green/states/states_text.asp

Get in touch with the state authorities, and remember to ask them 
to point you in the right direction for the city authorities. 

Good luck with your marketing campaign.

Best wishes

Your TaxMama-ga

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Request for Answer Clarification by silverstreet-ga on 21 Jun 2004 18:44 PDT

Thank you for the information. I think we're on the right track, but
not quite there yet as I still am unaware as to what license needs to
be obtained and from whom. A little more information. The company is
an I.B.C. It lists its address for customers at a Los Angeles mail
forwarding center. Whether or not, this is considered an ;office' I do
not know.

I did find this on the site you directed me to:

http://www.ss.ca.gov/business/other/bp_other_fp.htm

Notice that it says:

'Every foreign (out of state or country) partnership other than a
foreign limited partnership...'

I do not understand if an I.B.C. is also considered a foreign limited
partnership. (The company does have the abbreviation Ltd. There are
two directors and that's all). If it is not considered a foreign
limited partnership, then the problem is solved. We need only to fill
out and file this form. But if it is considered a foreign limited
partnership, what then?

I found this:

http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=15001-16000&file=15611-15620

(l) "Foreign limited partnership" means a partnership formed under
the laws of any state other than this state or under the laws of a
foreign country and having as partners one or more general partners
and one or more limited partners (or their equivalents under any
name).

Our company xxx Ltd. is a B.C.I incorporated in the British Virgin
Islands with two directors. Do we fall under the definition of a
Foregin Limited Partnership? If not, good! I'll file the form and
we're done. If it is considered a foreign limited partnership, what do
we do?

Please advise.

---

Clarification of Answer by taxmama-ga on 24 Jun 2004 05:18 PDT

Dear Silverstreet,

Sorry to take so long to respond. I just set up my Google Mail account
this week and forgot the clarification requests would be going there.

Do you have a specific reason for having a Los Angeles address?

I mean, do you have someone, a contact or friend, in the Los Angeles area
working with your company? 

If not, move that address out of Los Angeles AND out of California. 
Trust me, I am IN California. Your life will be less complicated if you
can move your mailing address to Nevada, Delaware, even Florida or
Washington state. (All tax-free states.)

I must tell you, I got chills when reading 'Los Angeles' in your notes. 
For not being present, you couldn't have selected a worse city/state
combination, when it comes to taxes and licensing. Both the City of 
Los Angeles and the State of California are very aggressive when it
comes to enforcing and collecing taxes. 

I stumbled across these public library informational pages that provide
information about L.A. and California. 
Business Licenses  - http://www.lapl.org/guides/startbus/4license.html
Business Taxes - http://www.lapl.org/guides/startbus/3tax.html


Most likely, by having that address within the city limits of L.A. (very
broadly defined by the City Council as being most of Southern California),
you have subjected yourself to CITY TAXES. The City of LA business license
requires you to pay a percentage of your GROSS SALES each year. 
http://www.lapl.org/guides/startbus/3tax.html#City

So, if you must stay in California - at least get it out of Los Angeles. 
Move your mail box to Beverly Hills, Pasadenda, Glendale, Malibu, 
even West Hollywood - those are all separately incorporated cities adjacent
to, or within the L.A. boundaries. They have fixed rate licenses. 

If you stay in Los Angeles, you are conducting a mail order business within 
City limits. Here is the application to file to get your business license.
http://www.lacity.org/finance/forms/TaxRegistrationV4.xfd

You may fill in the form online, then print it out and mail it to the address
shown on the top right hand corner of page 1. Be sure to fill in page two to 
show your prior year activity.

If your business started before 2004, expect to pay taxes, penalty and interest
for the previous years. (Even as charming as I am, I have not been able to get
that waived for my clients.)

For the state of California, you're right, you don't qualify as a foreign 
partnership. The form says not to use it if you're a limited partnership. 
While I do not know what an I.B.C. or B.C.I. is, you did mention that your
business name includes LTD. That would make you a 'limited' entity. 

That probably makes you a limited partnership in the eyes of the state. 
You will pay an annual minimum $800 limited partnership fee 
http://www.ss.ca.gov/business/lp/lp.htm

and a Secretary of State (SOS) annual filing fee (about $20). 
For the SOS, you will need to register, using form LP-5, scroll down this page
to FOREIGN (out of state or country) LIMITED PARTNERSHIPS:
http://www.ss.ca.gov/business/lp/lp_formsfees.htm

And send in the $70 application fee. They will send you the annual report
of partners each year. That $20 (or so) annual fee and form must be filed on 
time each year or they add a $250 penalty. So, be sure your mailing service
gets your mail to you on time. (The SOS does mail those forms out with 
plenty of time to respond. They ARE good about it. And they have been known
to waive the penalty if you have a good excuse for being late.)

In addition to the SOS's office, you will have to file annual partnership 
returns, using Form 565, along with your $800 fee. Here is the booklet:
http://www.ftb.ca.gov/forms/03_forms/03_565bk.pdf

If you're going to stay in L.A. I do suggest you get someone local to help
you with all the filing requirements. You will want someone who can help you
research ways to keep your taxes and filing requirements to a minimum, as 
a foreign entity. If you need recommendations, I can provide them. 
(no, not me, sorry)

Please, consider moving out of California.

Best wishes

Your TaxMama-ga

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Clarification of Answer by taxmama-ga on 25 Jun 2004 04:41 PDT

Dear Silverstreet, 

Thank for your considered review, and for asking me to clarify
anything you didn't feel answered your question.

Yes, I DID answer your question. 

You are not just receiving mail in Los Angeles in the eyes of 
the City of Los Angeles or the State of California. 

You are advertising that Los Angeles address as your company's mailing address.

You ARE doing business in Los Angeles and in California. 

It would be different if you were using some Nevada address in your ad and
having the Nevada mail forwarded to Los Angeles....then, you'd just be
receiving mail - and it would be a gray area - maybe yes, maybe no. 

But the L.A. mail service IS your marketing address, as far as your 
customers are concerned. Explain that when you ask the good folks at
the City Clerk's office and the Secretary of State's office. 

Have fun. 

It's been great helping you!

Best wishes,

Your TaxMama-ga

Thanks for the info. The real question then is whether simply
receiving mail through an intermediary in LA subjects a foreign
company to LA taxes. It seems that this is still unanswered, although
I will call some of the numbers on the links you gave me to try and
find out. Theoretically, we might want to utilize mail forwarders in
every state in the country. Does that mean that every state would tax
us? I don't know. I hope not! I have a feeling that a British Islands
corporation is outside their jurisdictoion unless we have physical
offcies in LA. I will find out! Thanks fot the info and if it turns
out you are right, we will 'move' to Deleware.