If you're considering expanding your business into another state other than the one it was formed in, the first thing you need to do is file your "Foreign Qualification".
What is Foreign Qualification?Whether you want to hire an out-of-state employee, purchase property, or you're simply generating the majority of your revenue from beyond your company's current state borders you need to file your Foreign Qualification. Meaning, you need to register your LLC or corporation in whatever states you do business in.
If you're reluctant to subject yourself stacks of tedious paperwork then you're in the right place! Our knowledgeable team of "Foreign Qualification" experts are biting the bit to talk about this stuff with you and help you navigate the murky waters of expansion so don't hesitate to chat or call now and let us do what we do best: File Your Foreign Qualification.
Everything You Need To Know About Foreign Qualification
Unlike the exotic connotation the word “foreign” typically ignites, Foreign Qualification means you register for a Certificate of Authority in whatever state you are conducting business in. The process just includes filing forms and paying a few required fees so the state is aware an outside enterprise is operating within state lines.
Some of the common instances in which a business needs to register include:
- If you’re buying property
- If you’re hiring an out-of-state, remote employee
- If the majority of revenue is generated beyond your state’s borders
There are numerous other examples of situations that require you to file for Foreign Qualification and so we’ve compiled an easy checklist below to go through and help you determine your next move as you expand.
- Do I have a physical presence in the state? (Brick and mortar retail store or lease an office)
- Did I apply for a business license in the state?
- Do I often conduct face-to-face meetings with clients in the state? (Does not include Skype or Virtual meetings)
- Does a heft stream of my company’s revenue come from the state?
- Am I paying state payroll taxes there?
Going through this simple checklist has helped thousands of our customers decide whether or not they need to move forward with registering in multiple states, especially for online E-commerce businesses who sell products all over the country. Below we’ve listed a checklist for the exact opposite instance.
When You Don't File For Foreign Qualification
Most of the time, those E-commerce companies we mentioned don’t need to be registered, however if you’re still up in the air trying to decide, take our advice and just do it.
When you fail to file it basically means you are conducting business illegally and subject to fees, audits and other unpleasant sanctions that you may as well avoid by just filing.
If you fail to file, you can also lose the right to bring a lawsuit to state court making you susceptible to being a victim in contract discrepancies or recover damages. You can always file and then pursue legal proceedings, but the time it takes to officially legitimize your business in the concerning state may give the plaintiff a leg up on the case.
There is also an alternative course of action if applying for Foreign Qualification doesn’t fit your fancy: you can form your entity in other states in which you plan to operate. This is a better option for LLCs who won’t have the same extensive formalities as corporations. Formalities like: issuing stock and recording transfers, holding initial and then annual shareholder and director meetings, keeping minutes of those meetings and finally, drafting and maintaining bylaws.
While this seems like a whole lot of extra work when you could just file for Foreign Qualification there actually is an advantage and that all has to do with the separation of liabilities. You see, since they are assets of completely two different entities, if your business in one state had to file for bankruptcy the assets of the your business in the other state are safe out of debt collectors way and will not be claimed to pay off the debts of your bankrupt entity. Whereas if you used Foreign Qualification and acquired your Certificate of Authority to legitimize your multi-state enterprise, there are no separation of liabilities and everything is up for grabs.
Foreign Qualification in Another State
For example, if your business is incorporated in Michigan, but you plan to open a satellite office in Ohio, you will have to obtain a foreign qualification for Ohio which usually comes in the form of a certificate of authority.
Many factors can go in to determining whether you transact business in another state, and those factors can also differ from state-to-state. Possible factors include:
- Do you have an office or physical presence in another state
- Do you hire W-2 employees
- Do you hold real estate assets in another state
- Do you accept orders in another state
- Do you have a bank account in another state
- Are you required to hold a specific license in the state
The Foreign Qualification Process
The process of Foreign Qualification starts with a name search. While the name of your business may be available in the state you formed your LLC or corporation in, that doesn’t mean it’s up for grabs in the state you are attempting to file for a Certificate of Authority. Once you have the out-of-state name in hand, you must find a third party representative to act as a liaison and act as your representation actions taken in the name of your business.
Once you have a registered agent acting as an extension of your LLC or corporation, its time to register for a Certificate of Authority. This is very simple and straightforward, much like when you filed for articles of incorporation or articles of organization. You must fill appropriate documents, pay the appropriate fees and send them on their way.
While the process is straightforward, the states do require different information although here are some of the common requirements:
- The name of your company
- Which state you originally incorporated or organized in
- When you officially incorporated or organized
- The legal address of your business where you receive mail under your entity’s name
- The name and the personal addresses of officers for corporations and members if you have an LLC
- number of authorized shares and a listing of the different classifications of stock (for corporations)
- What type of management you are utilizing
- Signature of a corporate officer, preferably the president if it’s a corporation, or a member if it’s a LLC
Some examples of information that is required by different states is typically:
-Names and addresses of directors if it’s a corporation
-The duration of the corporation or LLC.
-The total number of issued stock shares if it’s a corporation
-Thorough financial information, a full list of assets and income
-Detailed outline of the scope of business that your company will be conducting.
A common hold up that stalls businesses from receiving their certificate of authority is when certain states want to ensure that your corporation or LLC remains in good standing with the state you formed it in and so they will request a submission of good standing. This is easy to acquire if you file your annual statements, but if you fail to pay or currently hold a delinquent status you will be in a bad standing with the state and first have to pay those fees before you can even think about filing your Foreign Qualification. Once you’ve submitted your prepared paperwork now you have the pleasure of waiting. The turn-around time for foreign qualification approval also varies between states but you can expect approval between two to four weeks.
What information do we need to file for foreign qualification?
The information required can differ from state-to-state, but usually includes:
- Company name
- Date and state of incorporation
- Name and address of a registered agent in the state of qualification
- Number of authorized shares and listing of different classifications of stock for corporations
With the help of DoMyLLC, incorporating in another state can be done in two easy steps:
- Place your order
- Verify your forms with a signature
Once you complete these steps, we’ll take care of the rest, including preparing paperwork, filing the documents of with the state, and everything in between, even paying the filing fees.
We’ll then send you copies for your records, including a hard copy via FedEx and an electronic copy to your email address.
At DoMyLLC, we offer:
- A customer satisfaction guarantee
- Price match guarantee
- Live customer support over the phone or online
- Customized service
- An experienced and expert team of individuals
Let us handle the process and details so you can focus on the important matters of running your business.
Hassle Free Process
Obtaining authority to conduct operations in another state can be started in two easy steps: placing your order and verifying your forms with a signature. After you have completed these steps, we take care of the details. We do everything from preparing the paperwork to filing the documents with the state. We even pay the filing fees. Once everything is filed, we send out your copies for your records. A physical copy will be delivered to your shipping address via FedEx and an electronic file will be sent to your email address.
Register for your certificate of authority if you are ready to conduct business operations across state lines. Get a quote or order your services now so that you don’t have to take on the entire process on your own.
Give us a call at 888-366-9552 if you have any questions–we are happy to help or