Keith Mack
California and New York have different laws and practices, and businesses must consider these differences when deciding which jurisdiction to choose for a lawsuit or to govern the law. For example, California prohibits post-employment non-competes, while New York allows them under certain conditions. Additionally, California's anti-SLAPP statute provides lawyers with a powerful tool for civil litigation, while New York does not have a codified set of rules, which can create uncertainty in the law. When it comes to taxation, both states have different requirements for businesses and individuals. If a company is engaged in intrastate commerce in New York, it is considered to be transacting business in the state and may be subject to New York taxes. On the other hand, California considers a business to be doing business in the state if it engages in any transaction for financial gain within the state or is commercially domiciled there.
| Characteristics | Values |
|---|---|
| California tax laws | Apply to companies that engage in any transaction for the purpose of financial gain within California, are organized or commercially domiciled in California, or have California sales, property, or payroll exceeding certain amounts |
| New York tax laws | Apply to residents with a permanent place of abode in New York State for substantially all of the taxable year and who spend 184 days or more in New York State during the taxable year; non-residents are only taxed on New York source income |
| New York LLC laws | Do not permit an LLC to convert out of the state; a foreign LLC or corporation not authorized to do business in New York cannot file a lawsuit in the state, but can defend against one |
| California LLC laws | Permit an LLC to convert in |
| New York non-competition agreements | Permitted as long as restrictions are reasonably limited in scope, necessary to protect the employer's legitimate business interest, not harmful to the general public, and not unreasonably burdensome to the employee |
| California non-competition agreements | Prohibited by statute, with a few limited exceptions |
| New York jury waiver provisions | Enforceable |
| California jury waiver provisions | Unenforceable in a California state court action |
| New York anti-SLAPP laws | Vary widely by jurisdiction |
| California anti-SLAPP laws | Provide lawyers with a powerful weapon to use in civil litigation, allowing parties to move to strike a complaint by demonstrating that they are being sued for an act in furtherance of their right of free speech |
| New York codification of rules | Not codified, leading to potential uncertainty and inconsistent application of the law |
| California codification of rules | Codified, making the rules easily accessible and permitting uniform application of the law |
| New York choice of law clause | Upheld by courts even when challenged based on California public policy, as long as the chosen law bears a reasonable relationship to the parties or the transaction |
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What You'll Learn
- California and New York have different views on non-compete agreements
- California permits LLC conversion, but New York doesn't
- California has anti-SLAPP laws that can be used in civil litigation
- New York has codified rules for litigation, California doesn't
- New York has a Yonkers resident income tax surcharge
California and New York have different views on non-compete agreements
California and New York have differing views on non-compete agreements. California has updated its non-competition law to give employees more freedom to work with competitors. This means that any agreements that restrict someone from working with a competitor in California are now invalid, except in limited cases, such as in the context of the sale of a business, the dissolution of a partnership, or upon the dissolution or termination of interests in a limited liability company. This change is expected to promote healthy competition between businesses and provide employees with better job opportunities.
On the other hand, New York has been considering a ban on non-compete agreements. In June 2023, the New York State Legislature passed a bill that would have prohibited almost all new non-competes in the state and allowed workers to void their non-competes and recover damages and compensation. However, this bill was vetoed by Governor Kathy Hochul, who called for a carveout to the ban for higher-wage workers. Despite this setback, the bill's sponsor, State Senator Sean Ryan, introduced a similar bill in February 2025, which included the requested carveout.
The differing approaches of California and New York to non-compete agreements can create complexities for businesses operating in both states. For example, a business with a non-compete agreement enforceable in New York may find that agreement unenforceable if the employee moves to California and works with a competitor there. This discrepancy between state laws can lead to legal disputes and highlights the importance of carefully reviewing employment contracts and non-compete agreements to ensure compliance with multiple state laws.
Additionally, the mobility of employees and businesses between California and New York further complicates the issue. For instance, a business registered as a New York LLC may need to register as a foreign entity in California if it plans to do business in the state. This scenario underscores the potential legal complexities arising from the differing views on non-compete agreements between the two states.
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California permits LLC conversion, but New York doesn't
California permits an LLC to convert in, but New York does not permit an LLC to convert out. This means that a company can convert to a California LLC from another state, but a New York LLC cannot convert to an LLC of another state.
California permits LLC conversion in several scenarios. A domestic (California) stock corporation (Corp) can convert to a California other business entity or foreign entity if the conversion is permitted under the laws of the jurisdiction of the foreign entity. A California LLC, LP, or GP can convert to a California or foreign other business entity. A foreign business entity can convert to a California Corp, LLC, LP, or registered GP if the conversion is permitted under the laws of the foreign business entity's jurisdiction. The document must be signed and acknowledged by all members of a member-managed LLC or all managers of a manager-managed LLC, unless a lesser number is provided in the articles of organization or the operating agreement.
If a company wishes to convert a New York LLC to a California LLC, it must register the New York LLC as a foreign entity in California. This will trigger an obligation for California tax returns and advance tax payments. The company must also continue to file business taxes in New York. Another option is to dissolve the New York LLC and open a new California LLC, which would result in only one set of corporation reports and taxes to deal with.
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California has anti-SLAPP laws that can be used in civil litigation
California has a strong anti-SLAPP law, which stands for "strategic lawsuits against public participation". The law allows a defendant to file a motion to strike the complaint, which the court will hear within 30 days unless the docket is overbooked. Discovery activities are placed on hold from the time the motion is filed until the court has ruled on it, although a judge may permit "specified discovery" if the requesting party can show good cause for it.
In ruling on the motion to strike, a California court will first determine whether the defendant established that the lawsuit arose from one of the statutorily defined protected speech or petition activities. If the court grants the motion to strike, it must impose attorney's fees and costs on the plaintiff, except when the basis for the lawsuit stemmed from California's public records or open meetings laws. The California anti-SLAPP law also gives a successful defendant who can show that the plaintiff filed the lawsuit to harass or silence the speaker the ability to file a so-called "SLAPPback" lawsuit against their opponent. Under this remedy, a SLAPP defendant who won a motion to strike may sue the plaintiff who filed the SLAPP suit to recover damages for abuse of the legal process.
California's anti-SLAPP statute is a powerful tool for litigators, as it can be used in a wide range of cases, including landlord-tenant law, family law, business litigation, and general civil litigation. It is important to note that the law is very broad, sweeping in speech of "public interest" regardless of whether it takes place in a traditional petitioning or public forum. This has made the application of the law somewhat controversial, with some courts in other states suggesting that early adjudication of a defendant's affirmative defense of privileged speech is unconstitutional.
The anti-SLAPP law was first enacted in California in 1992 and has since undergone several amendments to clarify and strengthen its protections for free speech and petitioning rights.
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New York has codified rules for litigation, California doesn't
When it comes to the question of whether two California companies can be subject to New York law, a notable consideration is the difference in the litigation rules between the two states. New York has codified rules for litigation, while California does not. This distinction can have significant implications for businesses operating in either state or facing legal disputes.
The codification of litigation rules in New York provides a clear and uniform framework for legal proceedings. It offers accessibility to the rules, enabling lawyers and litigants to easily refer to and understand the applicable regulations. This accessibility promotes consistency and predictability in the application of the law, ensuring that all parties involved are aware of the specific guidelines governing their case.
On the other hand, California's lack of codified litigation rules can introduce a level of uncertainty and inconsistency in legal proceedings. Without a standardized set of rules, lawyers and judges may have more room for interpretation, potentially leading to varying approaches and outcomes in similar cases. This absence of codification can make it challenging for businesses to navigate legal disputes, as the specific procedures and evidentiary standards may be less defined.
The impact of this difference can be observed in cases where there is a conflict of laws between the two states. For instance, in the case of Career Partners, Inc. v. Brady, Justice Borrok of the New York County Commercial Division rejected an attack on a New York choice-of-law clause based on California public policy. This highlights how the codified nature of New York's litigation rules can carry more weight in legal disputes, even when dealing with policies from another state.
In summary, the distinction between New York's codified litigation rules and California's absence of such codification is an important factor to consider for businesses operating in these states. It can influence the predictability and consistency of legal proceedings, impacting the strategies and outcomes of potential disputes. Understanding these differences is crucial for companies to make informed decisions and effectively navigate the legal landscape in their respective states.
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New York has a Yonkers resident income tax surcharge
In New York, residents of Yonkers are subject to a Yonkers resident income tax surcharge, which is computed and reported on their New York State tax return. This surcharge is separate from the New York City personal income tax, which applies to all city residents regardless of where their income is earned.
If you are a Yonkers resident, you must report your Yonkers resident income tax surcharge on Form IT-201, Resident Income Tax Return. If your Yonkers resident status changed during the year, you must complete Form IT-360.1, Change of City Resident Status, and submit it along with the appropriate tax forms (Form IT-201, Form IT-203, or Form IT-214).
Nonresidents of Yonkers may be subject to the Yonkers nonresident earnings tax if they earn wages, carry on a trade or business in Yonkers, or are members of a partnership that does so. This tax is filed using Form Y-203, City of Yonkers Nonresident Earnings Tax Return.
It is important to note that the rules regarding residency and tax liability can be complex. For example, an individual may be considered a New York State resident for tax purposes if they maintain a permanent place of abode in the state for substantially all of the taxable year and spend at least 184 days in the state during that year.
Additionally, if you have a business entity, such as an LLC, in one state and then move to another, you may need to register it as a foreign entity in the new state and continue filing taxes in the original state. This can be a complex process, and it is recommended to consult with a tax professional or attorney to ensure compliance with all applicable laws and regulations.
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Frequently asked questions
If you are planning on doing business under the LLC in California, then you should register it as a foreign entity. Alternatively, you can dissolve the NY corporation and open a new CA corporation, or continue the LLC in New York and register to do business as a foreign LLC in California.
All city residents' income, no matter where it is earned, is subject to New York City personal income tax. Nonresidents of New York City are not liable for this tax. If you were a resident for only a portion of the year, your income subject to tax will be split, with part taxed according to resident rules and the remainder taxed according to nonresident rules.
If you are doing business in California, you are subject to California tax laws. This includes engaging in any transaction for financial gain within California, being commercially domiciled in California, or having California sales, property, or payroll that exceed certain amounts.
California and New York have different views on the enforceability of post-employment non-competition agreements, pre-dispute jury waiver provisions, and anti-SLAPP laws. California generally prohibits post-employment non-competes and does not enforce pre-dispute jury waiver provisions, while New York allows for the enforceability of these agreements under certain conditions. California's anti-SLAPP statute provides lawyers with a powerful tool in civil litigation, allowing them to move to strike a complaint if they are being sued for acts protected under the right to free speech.
Yes, a California company can be subject to New York law in certain situations. For example, if a California company is doing business in New York or has a physical presence in the state, it may be considered to be transacting business in New York and may be subject to New York laws and taxes. Additionally, in some legal disputes, a New York court may uphold a choice-of-law clause that specifies New York law, even if the other party is based in California.
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