How to get Foreign Qualification

Did you know that you need to get Foreign Qualification to do business anywhere outside the state where you incorporated your business? What’s more, Foreign Qualification doesn’t have anything to do with running your business overseas. It relates to the certification you need in the United States when it’s time to expand your operations into neighboring states, or further afield.

This page explains everything you need to know about Foreign Qualification, how to get it, and how IncReg helps you on every step of your journey.

What is Foreign Qualification?

When you incorporate an LLC or corporation, you do so in one state only. That means the Secretary of State’s office holds the Articles of Incorporation for your business, checks compliance, and issues important documentation like your Certificate of Good Standing. Essentially, you have approval to conduct your business in that “domestic” state.

But this doesn’t authorize your business to operate in any other states. For example, if you incorporate a chain of successful sports outlets in Colorado and want to expand to California, you will need to get Foreign qualification from the California Secretary of State’s office.

Failure to do this could land you in difficulties and even leave you without limited liability protection in California. So, ensuring that your Foreign Qualification compliance is in place forms an important step in your business journey.

What does doing business in another state mean?

You go to a convention in a neighboring state, take some samples and arrange some demos for potential clients and customers, which lead to orders on your website.

You may think you won’t need Foreign Qualification for this business trip as you don’t have a permanent presence there and you’re processing the payments and orders through your domestic state.

However, you must check the scope of your work before you decide to do any business in another state and confirm it doesn’t contravene the state’s Foreign Qualification Statute.

Typically, this statute lists all the things that don’t count as doing business so you can search for your business activities and check you are in the clear.

Broadly, you are likely to need Foreign Qualification for activities in another state if any of the following applies to your business.

• You establish anything that looks like a permanent physical presence in that state. That means shops, offices, and storefronts.
• Your business is purchasing or leasing property.
• You have issued contracts that would make you liable to pay state taxes.
• Your business ships goods and services directly from a “foreign” state, even if the orders come in, and are fulfilled, through your business in its domestic state.
• Employees contracted by your business work for you in the “foreign” state.
• You’re applying for business licenses and permits.

Even if you aren’t undergoing those activities, you may still need Foreign Qualification to get permission for less major pursuits.

• You are regularly attending meetings with clients and customers, especially if these lead to orders and contracts being signed.
• You have employees working and resident in that state who may have payroll taxes due there. This is especially relevant given the rise in remote and hybrid working.

If confirming all this sounds like a lot of work for every state where you might want to do business, then IncReg can take care of everything for you.

Do Internet businesses need Foreign Qualification?

If you have fulfillment centers operating around the United States, you will likely need to get Foreign Qualification in those states.

Taxation

All states are different, but most will use a designation called “nexus” to decide if your business activities and assets are significant enough to constitute a definite presence. If they do, then you’re liable for state taxation.

IncReg’s tax experts ensure that you are always on top of your taxes wherever you are doing business.

What you need to do to get Foreign Qualification

Just like when you incorporated in your domestic state, you must follow a process to get Foreign Qualification in another state.

• Obtain a Certificate of Good Standing: As long as you are up to date with all your taxes, licensing, reporting and other compliance in your domestic state, you can apply for a Certificate of Good Standing. This shows that you are authorized to do business in your domestic state.
• Establish your business name: Of course, your LLC or corporation already has a name in your domestic state, but someone may have taken it in the state you want to expand into. If you find yourself unable to do business under your “real” business name you’ll need to choose a “fictitious” name to file.
• Find a new Registered Agent: Already established in your domestic state, you’ll know the importance of a good Registered Agent acting as the legal point of contact for your business. However, you’ll need a new registered agent located in each state where you do business.
• File for your Certificate of Authority: Much like when you filed your Articles of Incorporation in your domestic state, you will need to file to do business as a “foreign entity” in the new state. You’ll need to apply with similar information.

How much does it cost to file for Foreign Qualification?

Filing fees vary by state. Usually, they begin at around $200 and can go up to over $1000. Remember, this is just the state’s charge for filing and doesn’t take into account your time collecting evidence and official documents, checking compliance, completing forms, and submitting your application (for every state you want to operate in).

IncReg covers all this for you, taking the hassle and stress away from getting Foreign Qualification.

What happens if you don’t get Foreign Qualification?

Failure to get Foreign Qualification can lead to loss of your limited liability protection, fines, and back taxes. What’s more, your business is unlikely to enjoy the state’s legal protections if you don’t have Foreign Qualification, leaving you unable to enforce contracts.

Ultimately, it is much easier to show your Foreign Qualification to a state official than it is to argue why you don’t think you need it.

Contact IncReg today and let our team of experts guide you through the process of Foreign Qualification in every state where you need your business working for you.

Avoid the hassle of repeated forms and applications; IncReg takes care of everything for you and ensures you are always on the right side of state compliance.