Doing business in multiple states
If your company
plans to transact business in a state or states other than your state of incorporation,
you may need to register your business in those states. This process is called
foreign qualification.
There are many
factors used to determine whether a company is transacting business in a state,
and the criteria differ by state. Some criteria evaluated include:
- Whether the company has a physical presence 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
If you are uncertain whether your particular
business needs to foreign qualify, or register to transact business in another state, it’s best to
seek the advice of an attorney or accountant.
Why foreign qualification is important
Foreign
qualifying your company in states where you transact business is not optional.
It is a legal requirement. Failure to qualify when you’ve been transacting
business could result in:
- Fines and
penalties for the time you were transacting business but were not qualified.
- Liability for
back taxes for the time you were transacting business but were not
qualified.
- Loss of access to
that state’s court system, meaning that if you were sued in that state, you
would not be able to defend the suit.
How do you foreign qualify?
Companies are
considered “domestic” only in their state of incorporation; elsewhere they are
a “foreign” entity. Foreign qualification is the process of filing the appropriate paperwork to register a foreign entity or company to conduct business in another state. To foreign qualify your business, you may need to:
- Register for a Certificate
of Authority in the state(s) where you want to do business.
- Apply for a Certificate
of Good Standing from your state of incorporation, showing that your
company is in existence and has met all state requirements.
- Pay applicable
state filing fees when you submit the Certificate of Authority filing.
- File annual reports, pay taxes and annual report fees in the state(s) where your company has undergone foreign
qualification.
Key Benefits
When foreign qualifying a business, there is interaction both with your state of incorporation and the intended state(s) of qualification. BizFilings handles this interaction on your behalf, allowing you to dedicate your time to your business.
Doing Business in Other States
Keep in Mind
Companies are required to have a registered agent not only in the state of incorporation but also in any/all states of qualification.
Registered Agent Service