A corporation, limited liability company, or other business entity is formed under the laws of the particular state. However, when that business operates in other states outside of its home state, the business entity will often be required to qualify as a foreign business entity in those other jurisdictions in which it is doing business. The process of qualification as a foreign business entity in a particular state is usually a simple process that requires filing an application in the foreign state, obtaining a registered agent located in the foreign state, and paying a fee. Once the business entity has been qualified in a foreign state, then the business entity will usually be subject to ongoing compliance requirements such as filing business reports and maintaining a registered agent in the foreign state.
The consequences of failing to register as a foreign business entity in a state where the business is operating can vary. However, the penalty in most states usually involves some combination of a monetary fine and the prohibition of the business from filing any lawsuits in the foreign state. Not all activity that a business may engage in, in a foreign state, will require them to register as a foreign entity. What constitutes doing business in a state varies from state to state. Most state laws do not define what constitutes doing business in the state, but often contain a list of what does not constitute doing business in the state. These lists typically include things such as maintaining a bank account, soliciting orders that require acceptance outside the state, or engaging in an isolated transaction.
If you have questions about whether or not your business’ activity in a foreign state would subject you to the requirements of foreign registration in that state, please contact a Bamberger attorney.
Author: Laura A. Scott (bio)
Phone: 812.452.3557
email: lscott@bamberger.com