You never know exactly where your business will take you. Because of this, it’s difficult to anticipate all of your new company’s needs. Over time, for instance, you may find yourself requiring new licenses as you expand into new geographical areas. And, at some point, you might even need to become a foreign corporation.
But what is a foreign corporation, and under what circumstances would you even need to become one? Contrary to its name, being a “foreign corporation” doesn’t have anything to do with operating outside the United States. It actually hinges on the fact that each U.S. state maintains different criteria for businesses operating within its borders. Your business was incorporated in its home state. But whenever your company expands into a new state, you’ll need to ensure you secure the rights to operate there too.
Chances are, you might need a bit of clarification on exactly how this process works. Let’s look a bit closer into what this foreign corporation definition means for you.
But before you get to that point, you have a bit of legwork to do. Ultimately, your goal is to secure a Certificate of Authority to legalize your “foreign” operation. Here’s a rundown of some of the basic steps involved as you explore expanding your business presence into a new state:
Your name: Remember how you had to confirm your current business name was available prior to incorporating your company? Well, moving into a new state means you have to do that all over again. With any luck, you can still keep the same business name. If not, you’re required to assume a fictitious name.
Your Registered Agent: For every state in which you do business, you’ll need a Registered Agent on file. This individual, of course, must be someone you trust, as they will represent your business in an official capacity. Your Registered Agent should maintain an address within the new state, as they will receive important documents.
Your Certificate of Authority: Then you can move forward with registering your business in that state. After the requisite paperwork and fees, you’ll receive your Certificate of Authority, and you’ll need to ensure you’re in compliance to maintain your company’s Certificate of Good Standing. Otherwise, your operation could be in trouble.
When You Know It’s Time for a Foreign Qualification
Of course, not every state will define conducting business in the same way. But you’ll need to remain in compliance for each state in which you maintain a presence. Otherwise, your company may not be eligible for loans, licenses or tax incentives. So, to avoid any such complications, here are a few ways to know if you are operating in a foreign state:
Major transactions: Your business is almost certain to need a foreign designation if you’re prone to making major business decisions out of your home state. Likewise, if the bulk of your transactions or management decisions involve another state, you will probably need a Certificate of Authority at some point anyway.
Business property: If you have any physical space within another state, then you are likely entrenched enough there to pursue a Foreign Qualification. This doesn’t even have to be another office or storefront. A warehouse — especially if it serves that outside state — would certainly count as foreign interests, as would employees or bank accounts.
Tax obligations: In the eyes of the various governmental bodies, few criteria are as definitive as tax payments. So, if your company is required to pay taxes in another state, this would undoubtedly qualify you as operating a business there. Selling from an outside state or holding contracts in a foreign state also triggers such tax obligations.
In the case of a Foreign Qualification, we aim to alleviate the burden of having to ensure your company is in compliance across every state in which you operate. For a busy professional like you, it simply might not be cost-effective or time-efficient to handle all the paperwork yourself. Because we know you already have your hands full with your company, we offer a full-service Foreign Qualification package. All you have to do is complete a single form, and we’ll take it from there.
If you’re interested in obtaining your Certificate of Authority in as painless a way as possible, then let Incfile help. For more on our Foreign Qualification service, check out our website!
Robert Yaniz Jr.
Robert Yaniz Jr. has been a professional writer since 2004, including print and online publications. Much of his experience centers on the business world, including work for a major regional business newspaper and a global law firm