May 27, 2016

When Do I Need to Register My Business In Another State?


business in another state

These days, it’s easy for geographical lines to be blurred when it comes to your business. Countless small business owners work with virtual teams, partners, clients, and customers they’ve never actually met in person.

This new reality can make it even more confusing to know if you’re conducting business in multiple states. Are you unknowingly running afoul of state law by operating without registering? Here, we’ll break down all the details about when you need to register your business in another state and when you don’t.

Foreign Qualification: Business in Another State

“Doing Business” in Another State

If your company is conducting business in any other states than the state where you incorporated (or formed an LLC), then you need to register your business in those new states. This is often called “foreign qualification.”

So, what exactly constitutes “conducting business?” If a customer in Oklahoma buys your product or service, and you’re based in Nevada, does that mean you are operating in Oklahoma? In this case, the answer is no.

Questions to ask to see if you need to file a foreign qualification for a state:

  • Does your LLC or corporation have a physical presence in the state (i.e. office, restaurant, or retail store)?
  • Do you often conduct in-person meetings with clients in the state?
  • Does a significant portion of your company’s revenue come from the state?
  • Do any of your employees work in the state? Do you pay state payroll taxes?
  • Did you apply for a business license in the state?

If you answered yes to any of these, your business may need to file a foreign qualification in that state.

Examples of Foreign Qualifications

Here are some examples of common situations when you need to foreign qualify and when you don’t.

1) Let’s say you operate a restaurant in North Carolina and want to expand into South Carolina. You’ll need to file a foreign qualification in South Carolina.

2) You incorporated your business in Nevada, but you are physically located in California. You need to foreign qualify in California.

3) You live in Massachusetts and your business partner lives in California. The company is incorporated in Massachusetts, but lately your partner has been bringing in the bulk of your company’s clients and meeting with them in California. You need to foreign qualify the business in California.

4) You are a freelancer who formed an LLC for your business in Florida. You perform the majority of your work online, and have clients all over the country. In this case, you don’t need to file a foreign qualification, since you’re not frequently physically meeting in another state. Just because you are bringing in revenue from customers in other states doesn’t mean you are transacting business there according to the law.

If you have any questions about whether or not your business needs to foreign qualify, you should check with your attorney or accountant.

How to Foreign Qualify

If you have determined that you need to register your business in another state, you will need to submit an application with that state’s Secretary of State office. In some states, this is called a Certificate of Authority, in others it’s the Statement & Designation by a Foreign Corporation.

You can contact the Secretary of State’s office yourself or have the service that incorporated your company handle the filing for you.

The paperwork itself is relatively straightforward, but keep in mind that some states will require you to have a certificate of good standing from the state where your LLC/corporation is registered. That means you will need to be up to date on your state taxes and filings.

The Bottom Line

If you are legally required to foreign qualify, make sure you follow through on this obligation. Otherwise, you will end up paying fines, interest, and back taxes for any time when you were not properly registered.

In addition, you lose the ability to sue in a state where you are not foreign qualified (and you should be). So don’t overlook this legal requirement. It could end up costing you much more in the long run.

Map Photo via Shutterstock

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Nellie Akalp


Nellie Akalp Nellie Akalp is CEO of CorpNet, her second incorporation filing service based on her strong passion to assist small business owners and entrepreneurs in starting their business. Free guides, advice and videos on small business legal topics are available at her Small Biz Corner.

34 Reactions

  1. Great advice Nellie. This government stuff is hard to stay on top of.

  2. Registering business to another state may benefit your company more. But its not easy to be qualified. You have to processed the requirements that is needed first. And paying taxes is relevant to the business owners, but they will be more attentive in paying it because the government is so strict in terms of that.

  3. I understand that once I have established my LLC IN FLORIDA to sell products from my CALIFORNIA CORPORATION (I have a residence there and will pay state taxes on sales there, etc.) , a company can then – once they received their “certificate to operate” from Florida’s Secretary of State Office, move their LLC to Delaware?

    this prevents most frivolous lawsuits from Flrodians since they must travel now to Delaware in order to appear… etc. Please straighten out my muddled thinking here. thank you.

  4. I have started an “S” corporation in Florida to buy a franchise. I have now found a location in California instead for the business. I was told that to be able to do the franchise here in California, I need to register the ” S” corporation in California first. Does anyone know, What do I have to do and what do I need in order to do that? Do you know where do I go in Los Angeles?

    Thanks for any help

    • Nellie Akalp

      Hi Josefina,
      It sounds like you are referring to a foreign qualification. This is a filing that must be submitted to the Secretary of State. It can be a little tricky because there are documents that will need to be obtained from the home state before applying in the new state. My company assists with filing foreign qualifications and would be happy ot assist you. Just give my office a call at 888-449-2638 x110, and ask for Katie Hendrix at extension 110. She’d be happy to offer you a free business consultation.
      -Nellie

  5. We have a query concerning the post, where am i able to make contact with the author?

  6. I’m venturing into a new business that involves all purchases via internet with independent contractions completing the job in OK. My business partner and I live in different states and my partner will be in OK. I gather the business must be registered in OK but can the business be registered in both our names even though I don’t live in OK.

    • Nellie Akalp

      Hi!

      Great question. Yes, absolutely. The fact that you are not located in the state of Oklahoma does not prohibit you from having ownership within a company registered in Oklahoma. If you have any further questions or would like assistance with registering your business in the state of Oklahoma, please feel free to contact Katie Hendrix in my office at 888.449.2638 x110.

  7. My business is registered in Wyoming, I have an office there but I currently live in Michigan. Clients come to my website via google and other sites linking to mine, there are no traditional meetings or physical outreach being done but I want to open a new business bank account while I am still here in Michigan. Will I need to file as a foreign Entity to open the account?

    • Nellie Akalp

      Hi Dave,

      It will depend on the policy of your particular bank. The rule of thumb, however, is if the company is physically located or has employees in a state other than the state it’s registered in, a foreign qualification is usually required. If you have any other questions or need assistance in filing your foreign qualification, please contact Katie Hendrix in my office for a free business consultation at 888.449.2638 x110.

  8. Approximately how much is it on average to file to do business in a different state? I understand it probably varies

    • Nellie Akalp

      Hi Dave,

      I would recommend contacting Katie Hendrix in my office for a free business consultation. With a little more information from you, she can assist you and get a better of idea of what may be required for your specific situation. She can be reached at 888.449.2638 x110.

    • Nellie Akalp

      Hi Brian,

      Great question. You’re absolutely right – it varies a lot! State fees can range anywhere from about $50 to about $600. If you’d like, you can contact Katie Hendrix in my office for a free business consultation at 888.449.2638 x110. If you let her know what your home state is, and what state you’re foreign qualifying into, she can give you an exact cost. She can even assist you with taking care of the filing!

  9. I have a question about a rental property. If I have an LLC in Connecticut but my rental property is in Rhode Island do I need to register in RI? I typically do not have contact with the renters.. It is usually just through email and snail mail. Occasionally a real estate agent will find a renter.

  10. Hi all,

    I was sued by a Delaware Corporation in the state of California, how can I find out if they had foreign qualification to sue me in California?

  11. My employer currently has an LLC out of Florida and has recently hired me; I live in Texas.
    What steps does he need to take to be legal?

    Thank you!

  12. Hi Nellie,
    I currently have my own LLC in Idaho where I am the sole proprietor for consulting services. I pay Idaho and federal taxes. I have an offer for contracting work in Nevada where they do not have state income tax. I will be travelling back and forth, a week on, a week off for a few months. They offered to pay a per diem amount on top of my daily fee to cover my expenses while in the state. Do I need to file for a foreign qualification?

    • Nellie Akalp

      Hi Bonnie,

      Great question. The general rule of thumb is a foreign qualification is typically required if the company has a physical address outside of the home state, or employees outside the home state. If you have any further questions, please contact Katie Hendrix in my office for a free business consultation at 888.449.2638 x110.

      • What if the employee works at home in another state (editor). Would you need to typically register to business in the employee’s state to do business.

      • Nellie Akalp

        Hi Jeff,
        Requirements can vary depending on the state and the situation, however, generally anytime an employee is located in another state (whether it’s at a home address, office address, storefront, etc.), a foreign qualification Is required. If you need assistance with this filing or have any additional questions, please contact Katie Hendrix in my office at 888.449.2638 x110.

  13. I have an Oklahoma LLC. We do all of our work in our only location which is here in Oklahoma. Recently a customer asked us to assist in the field installation of our equipment. This may happen again as well. Do we need to register in Montana where the field installation will be? We would be sending our Oklahoma employees to Montana. The work may last one to two weeks.

    • Nellie Akalp

      Hi Lori,

      Thank you for your question. While requirements can vary depending on the situation, the general rule of thumb is that a foreign qualification is required if the company has a physical address in a foreign state, or employees in another state. If you still have further questions, please feel free to contact Katie Hendrix in my office for a free business consultation at 888.449.2638 x110.

  14. Hi Nellie,
    Thanks for writing your article. As a vendor, planning on doing business in another state and hiring a sales person for a short period of time, would I be required to register as foreign qualified?
    Thanks

    • Nellie Akalp

      Hi Sunita,
      Generally the rule of thumb is that if the company will have physical locations in other states, or employees in other states, a foreign qualification is usually required. If you have any further questions or would like assistance with filing a foreign qualification, please contact Katie Hendrix in my office for a free business consultation at 888.449.2638 x110.

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