Your business is expanding beyond your local region. Or perhaps you are an Internet business with fulfillment centers in multiple locations. This may mean you are doing business in a “foreign” state. What do you do? We have the answers to all your questions regarding what constitutes doing business in another state and how to get the proper paperwork done to be legitimate.
Many confuse foreign qualification with the idea of operating outside the United States. This really has to do with how you perform within the borders of the United States. “Foreign,” in this case, refers to the fact that each state has operating rules that are different from one another; and, in turn, must insist on proper registration to do business in that locale.
Therefore, it is important that when your company is located in or operates within a state other than the place of original incorporation, you are given the proper rights to conduct business there. This actually means you need to obtain a Certificate of Authority.
We can take care of the details. Let Incfile help you file your Foreign Qualification today!
How To Define Foreign Qualification
A corporation or LLC is only recognized in its state of incorporation. To be considered “foreign” in any state you must be domestic to another state, meaning your business was incorporated there. A Foreign Qualification results in a Certificate of Authority, which gives you legitimate rights to do business in the state. It is the process of registering an LLC or corporation that operates in a state outside the state of incorporation. A Foreign Qualification must be completed in each state that a corporation or LLC intends to conduct business.
How Businesses Are Classified As Foreign
What does it mean to “do business” in a state? Let’s discuss the activities that determine you are conducting business in another state.
Essentially, if your actions go beyond minor transactions in a state, such as making management decisions, you will likely be seen as a “foreign” entity that needs to register. However, there are some simple rules that help weed out the minor from the major “doing business” stature.
- First, the company would have a physical presence in the state. This refers to the existence of an office, store or warehouse that services or solicits residents of that state in any form. It could also refer to having employees or even bank accounts in a state.
- Second, if your company has to pay state taxes in a particular locale, they are going to be tagged as “doing business” in a state. Taxes are assessed when a company sells directly from a state or upholds a significant number of contracts in a state.
If your business fits any of these criteria, you could benefit from filing a Foreign Qualification with us.
Why You Need The Certificate Of Authority
If a company neglects to file the Foreign Qualification, it does not have legal standing or authority to transact business within that state. Every state has different rules regarding what constitutes transacting business. This could also effect your businesses Certificate of Good Standing, which you need to get a business loan, renew your business license or file your business taxes.
“Your goal is to be registered in each state that you do business.”
This requires filing on each state website for a Certificate of Authority. We know this can be cumbersome, so we’ve simplified the process. Simply complete our online Foreign Qualification form, and we’ll do the paperwork for you.
How The Foreign Qualification Process Works
Every process has paperwork and proper steps to follow. To give you an understanding of what we’ll be doing on your behalf, let’s review the process below:
- Name Search: Your corporation’s name will be compared to the database in each state to ensure no other company is using it. Hopefully, there will be no contradiction, but if there is then you’ll be asked to operate under a fictitious or assumed name. If you'd like to conduct your own name search for your LLC, we've created How to Search & Choose Your Business Entity Name in all 50 States.
- Registered Agent: You will need to select a registered agent in that state.
Certificate of Authority: Finally, you register for the right to do business in the state. This is similar to the process of incorporation and requires some paperwork and fees be submitted.