Expand Your Business with Foreign Qualification

Foreign qualification does not mean qualifying to do business outside of the United States of America. In this context, foreign qualification is registering to do business in another state. 

When you started your business, you registered with either your home state or a different state of your choosing. If you want to conduct business in a state other than where you originally incorporated, you must be foreign-qualified. For example, if you have employees, assets, or generate significant revenue from another state, you must file the necessary paperwork to receive authorization to do business in that state.

You must file for foreign qualification to conduct business in another state. You may also need to foreign qualify if:

• Your operations are primarily in a state other than the one where you originally formed

• You have a physical presence in another state, like leased space or owned property

• You have employees in another state

• You do business, such as take orders or earn revenue, from another state

• You have a bank account in another state

If you conduct business in another state without filing the necessary paperwork, the state may charge you a penalty and make you pay any past-due fees. You may also be unable to adequately pursue or defend a lawsuit in the states' court systems where you are operating without foreign qualifying.

An alternative to foreign qualification is incorporating your business or forming your limited liability company (LLC) in the other state(s) where you plan to do business. However, when you incorporate or form your LLC in multiple states, you create separate domestic entities in those states. 

You can avoid forming new, distinct corporate entities in each state by foreign qualifying. This saves unnecessary costs and administrative headaches for your business.

The state fees for foreign qualification can range from $50 to $350. The filing fees and reporting requirements will depend on the state and business entity type. For example, a foreign corporation will pay $245 in Delaware and $100 in California.

A certificate of authority, also known as an application for authority, is the legal document allowing you to conduct business activities outside of your original state of formation. It is typically issued by the secretary of state.

A domestic LLC is a business that operates in the owner’s “home” state or original state of incorporation. A foreign LLC, or any foreign entity, is an organization conducting business out-of-state or in a state other than its original state of incorporation.

The state fees for foreign qualification can range from $50 to $350. The filing fees and reporting requirements will depend on the state and business entity type. For example, a foreign corporation will pay $245 in Delaware and $100 in California.