Foreign Qualification Service

What is a foreign qualification?

Corporations and limited liability companies (LLCs) transacting business in a state or states outside of their state of incorporation are often required to foreign qualify in those states.  A corporation or LLC is considered to be domestic only in the state where it is incorporated. In all other states, your company is regarded as a foreign corporation or LLC. The process of foreign qualification notifies the other state(s) that a foreign corporation or LLC is transacting business there. The same is true for limited partnerships (LPs) and limited liability partnerships (LLPs). They are considered foreign LPs and LLPs in all states other than the state of incorporation.

What constitutes transacting business in additional states?

There are many factors used to determine whether a company is transacting business in a state, such as:

• Whether the company has a physical presence/address in the state
• Whether the company has employees in the state
• Whether the company accepts orders in the state
• Whether the company has a bank account in the state

This is not a complete list and different states may have different criteria. For questions regarding whether your particular company needs to foreign qualify, talk with an attorney.

What paperwork is required to foreign qualify?

To foreign qualify you must file a Certificate of Authority, which is a document that grants a foreign corporation or limited liability company (LLC) permission to transact business in that state. Many states require a Certificate of Good Standing from your state of incorporation before granting a Certificate of Authority. The Certificate of Good Standing states your company has met all the necessary requirements for corporations or LLCs imposed by your state of incorporation.

What fees are required to foreign qualify?

Each state imposes a filing fee that must be paid when the Certificate of Authority is filed. These fees vary by state and entity type. Additionally, foreign corporations and limited liability companies (LLCs), limited partnerships (LPs) and limited liability partnerships (LLPs) must pay taxes and annual report fees both in the state of incorporation and also in the state(s) of qualification on an ongoing basis.

Who can file a foreign qualification?

There are no restrictions as to who can submit a foreign qualification filing. Anyone who prepares and files the Certificate of Authority and completes additional requirements (i.e. providing the Certificate of Good Standing) with the appropriate state agency is eligible to foreign qualify a business in that state.

Do I need an attorney to foreign qualify?

No, an attorney is not a legal requirement to foreign qualify a business.  You can prepare and file the Certificate of Authority yourself, but it’s good to understand the requirements of your intended state of qualification. You can use BizFilings to foreign qualify and save money on attorney fees. If you are unsure if a foreign qualification is required for your business, consult an attorney.

What information is required on the Certificate of Authority?

As with the incorporation documents, the type and amount of information each state requires differs. Commonly required information includes:

• Company name
• Date and state of incorporation
• Name and address of a registered agent in the state of qualification
• Name and addresses of officers (for corporations)
• Number of authorized shares and a listing of the different classifications of stock (for corporations)
• Signature of a corporate officer (often the president) or member/manager information (for LLCs)

Additional information is also requested by some states:

• Names and addresses of directors (for corporations) or members/managers (for LLCs)
• Duration of the corporation or LLC (which is often perpetual)
• Number of issued shares of stock (for corporations)
• Financial information, including information on assets
• Specific business-purpose clause outlining the type(s) of business the company will undertake

What happens if my company name is not available in the state where I'd like to foreign qualify?

If your name is not available in the state of qualification, BizFilings will notify you and ask for a second name choice. You may also file for a doing business as (DBA) name for your company in the state of qualification to do business using a name other than the name on your Certificate of Authority.

What is an example of a company that should foreign qualify?

Greenbush Telecom Inc. is a telecommunications company providing services in four other states. Greenbush is incorporated and maintains its headquarters in Georgia. It also offers its services in Florida, Alabama and Tennessee by employing contractors in these states. The company has offices and employees in these other states, and it offers services and accepts orders from residents of these states. Most likely, Greenbush Telecom would be required to foreign qualify in Florida, Alabama and Tennessee.

What are the consequences of not foreign qualifying?

If this is later discovered that your company has been transacting business in a state and should have foreign qualified, your company will typically be subject to fines and penalties, as well as being liable for the back taxes for the period in which it transacted business in the state without being foreign qualified.

The second consequence of not foreign qualifying your business is that you could lose access to that state's court system until you file a foreign qualification. This means if an employee or customer within a state in which you are transacting business were to sue your company, you would not be able to defend the lawsuit in that state's courts, because your company is not recognized as a business there. Typically, if this happened, your company would be given time to undertake the qualification process in order to allow you to defend such a lawsuit.

Because what is considered transacting business can be a gray area, talk with an attorney or accountant if you have questions as to whether your company is or will be considered to be doing business in a particular state.