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


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.

8 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

    • 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.

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