Frequently Asked Questions about Foreign Qualification Filings
Our company has customers in the whole country. Do we need to file foreign qualification papers everywhere?
Each state has a different set of guidelines and criteria as to what “conducting business in another state”. However most of the states include (but are not limited to) the following:
- Operating at a physical location such as an office, store or warehouse within the state
- Employing a resident who works within the state
- Getting a business license within the state
- In some states, opening a Bank Account
What actions does not count?
- Holding meetings of the board of directors or stockholders or carrying on other activities concerning internal corporate affairs;
- Maintaining offices or agencies for the transfer, exchange and registration of the entity’s own securities or maintaining trustees or depositaries with respect to those securities;
- Making sales through independent contractors;
- Accepting orders outside of the state and filling them by shipping goods into the state;
- Creating or acquiring indebtedness, mortgages and security interests in real or personal property;
- Securing or collecting debts or enforcing mortgages and security interests in property securing the debts;
- Owning real or personal property (unless you lease the property);
- Isolated transactions completed within a certain amount of days (30-120 in most states) and not a part of a series of similar transactions;
Do we need a Registered Agent?
Yes. Your company is required to maintain a Registered Office (agent) in the state of qualification.
What are the risks involved with not filing foreign qualification documents?
If the state discovers that a non-registered company is doing business within its boundaries, the company will be subject to significant fines and penalties. That alone should be enough reason to consider doing the right things.
Additionally, failure to register has another consequence that can be even more damaging: If you are doing business without a registration, the state won’t recognize your company’s legal status. If your company is sued, you may be denied the right to defend yourself in court. In other words, plaintiffs can be awarded judgments against your business and there is nothing you can do about it.
