One of the metrics of success for any business is growth and the need to branch out and begin operations in other areas. In the beginning, this may be a comparatively simple process. Opening another office in a different part of the city, or even another city within the state, is a simple matter of repeating the real estate and business ordinance processes done before when a business first began. However, once a business moves to operate in different states, things get more complex, and there’s a need for additional compliance in the form of foreign qualification.
In general, most businesses will not require foreign qualification if they are doing limited transactions in another state. These situations generally fall under:
- Isolated transaction
- Business activity conducted under 30 days
- Secondary activities like maintaining corporate books or conducting internal affairs
- Opening a bank account
- Wholesaler relationships
- Partnerships or joint ventures
What Is Foreign Qualification?
While many people think of the quality of foreignness as coming from another country, in the business world, a business is considered foreign once it expands operations to states other than the resident state in which it began. Any franchise, retail outlet, or additional office for a business that grows to the point where it is ready to operate in other parts of the country must now receive a foreign qualification from the state of choice to operate there legally.
In many cases, foreign qualification is granted once a certificate of authority has been approved. As with many aspects of American business, however, while there may be some general guidelines for securing foreign qualification in a different state, the specifics will vary from state to state. Getting a certificate of authority in New Jersey is not the same as getting a certificate of authority from Florida.
You’ll usually need to apply for a foreign qualification under the following circumstances:
Hiring an employee who is a resident of a state other than that of the business’s incorporation
- Opening a new office or another facility
- Purchasing property
- Offering products, services, or bidding on a contract
- Applying for a professional license
Do Your Research
In the same way that certain regulations, licenses, permits, and compliances had to be observed to operate in your state of residence, it’s crucial that you learn the specific requirements, fees, and administrative processes and timelines required to secure foreign qualification in your chosen state. The other alternative is to work with businesses with the expertise and experience to ensure all compliance is observed when a company seeks a certificate of authority in another state.