What Is a Certificate of Authority and Why Would You Need One?
Your business is growing. Opportunity is calling and it’s now time to expand your company’s presence and operations beyond your “home” state where you initially registered your business. For some, these opportunities may consist of advantageous sales prospects, meeting the needs of a new market or even favorable tax environments. But before you can move forward with any plans to expand to new states, you’ll need to apply for your Certificate of Authority.
What Is a Certificate of Authority?
Simply put, a Certificate of Authority will allow you to legally conduct business outside the state where you initially filed your company —whether as a limited liability company (LLC), C Corp or nonprofit.
Also referred to as a Foreign Qualification, the Certificate of Authority is of the utmost importance as it will allow an LLC or corporation to conduct business “lawfully” and abide with compliance matters governed within each state. (Note: the word “foreign” as used here does not constitute markets outside the United States, but rather the states other than your home, or domestic, state that may have different rules and processes, as well as tax-related conditions.)
If you are planning on setting up shop in multiple states, you will need to apply with each state you plan to operate in. However, don’t be discouraged by the registration process. Even though the applications may vary — along with the required documents — the process is generally the same in every state.
“Doing Business” in Other States
The main purpose of applying for a Certificate of Authority in other states is to meet the expanding needs and goals of your company and take advantage of market and growth opportunities. Three key criteria that constitute “doing business” within a state include:
- Operating out of a physical location, such as a dedicated office space or store
- Hiring employees from the state where you are applying for the Certificate of Authority
- Maintaining a bank account in the state
Without a Certificate of Authority, you will not be able to conduct or “do” business in other states. Whether it’s selling tangible goods or offering a service, a Certificate of Authority will be required for each state.
Applying for a Certificate of Authority
So it’s time to expand. You are ready to move on your plans to make deals, sign contracts and open new stores or offices in states other than the one where you initially registered your business. Before you sign that lease, start a marketing campaign or begin hiring staff, you will need to submit your Certificate of Authority/Foreign Qualification application.
The application process will include a fee that can range from as low as $25 to as high as a few hundred dollars. The fee will also vary depending on the type of company you own. In addition, you will be asked to submit documents that prove your business is in good standing, including, but not limited to a Certificate of Good Standing issued by the office of the Secretary of State.
As with the application fees, the processing time can also vary. In most states, the average waiting time can be a day or two. In some cases, it can take as long as a few weeks. Expedited processing can complete the registration in a matter of a few hours, but it will also add a few hundred dollars more to the application fee.
To avoid any issues or delays in approval, it is important to follow all the instructions and provide all the requested documentation. This will help ensure a smoother registration experience. It’s also a good idea to speak to a lawyer or work with a Registered Agent as laws and requirements may vary from state to state. Any errors in the filing or missing documents will result in a rejected application and the need to reapply and pay another registration fee.
The Benefits of a Certificate of Authority
By successfully applying for a Certificate of Authority you are now ready to grow your company without having to incorporate as a new business. You’ll also be able to collect taxes on goods and services. Whether you are taking advantage of a favorable tax breaks or meeting the demands of the local market, the Certificate of Authority will allow you to move forward and expand your business.
Without it, your company can be fined by the state where you are “unlawfully” conducting business. Penalties will be more costly than the time and expense to register, and the state can suspend or shutter your business without the certificate. You will also need to maintain your good standing and pay state taxes, as well as the yearly or quarterly maintenance fee for your certificate.
Having a Certificate of Authority in multiple states is essential for an expanding business. It is also a true sign that you and your company are on the path toward success.
Get a Certificate of Authority with Incfile
Incfile can assist you when it comes to filing for your Certificate of Authority/Foreign Qualification, as well as acquiring your Certificate of Good Standing. Incfile has helped over 250,000 customers establish their business, file documents and apply for their Certificate of Authority.
Use our Foreign Qualification service to guarantee that your documents and fillings are updated and renewed year after year, so your focus can stay on the growth and the success of your business.