Foreign Qualification/Certificate of Authority
Expanding into additional states is a true sign of the success your business is having. It’s very important during this exciting growth to remember the rule…every change your business goes through probably has a state required business filing to go with it. Failing to remember this basic tenant of having a Corporation or LLC can result in penalties being issued by the state.
A Foreign Qualification, also known as a Certificate of Authority, is the process you go through with the Secretary of State to transact business in a state other than the one where your company was formed.
This process and the associated business filing can be rather tricky since details vary by state. Once again, that’s where we come in! Since we work with all of the states, we can cut through the confusion that comes with Foreign Qualifications and complete this for you, whether it’s for one state or for all 50.
By the way, congratulations on your success!
We are experts at getting your business Foreign Qualified and we make it our mission to handle all of the difficult steps required by the Secretary of State so you don't have to. In short, we make the business filing easy!
Just answer a few simple questions on our secure and confidential questionnaire. This usually takes about ten minutes. One of our experts will review the information and prepare the paperwork required by the state. We will keep you informed, step by step, throughout the process so you will never have to wonder about the status of your filing.
When you are approved to conduct business in the new state, we will send all of the documents to you for your files.
What could be easier?
Our business filing process was designed to be so easy that anyone could do it.
Here’s how it works:
- Complete the online questionnaire for your business filing:
We will ask you simple questions related to your business to ensure a smooth filing. This often takes as little as 10 minutes and will keep you from guessing whether you’ve done everything that’s needed to complete a successful business filing..
- We file your paperwork with the state:
Once we have Step 1 completed, we will create the documents that the state needs for the Certificate of Authority or Foreign Qualification. We give them a quality check to make certain your answers are accurately reflected and the actual business filing with the state takes place.
- Final steps:
Once we receive your documents back from the state, we will forward them to you along with any other related papers or directions.
Truly as easy as 1, 2, 3! All of the confusing processes that happen in-between these three steps are handled by us. That’s the real magic of what we do!
Q: What is a Foreign Qualification/Certificate of Authority?
A: A Foreign Qualification is also frequently called a Certificate of Authority. This is the process you go through to register your company to transact business in a state other than the state in which your company was formed. Basically, your Corporation or LLC is considered to be a domestic entity only in the state where it was formed. Think of this as your home state. In all other states, your company will be regarded as a foreign Corporation or LLC.
Q. What constitutes transacting business in additional states?
A. There are many factors used to determine whether a company is transacting business in a state. Some criteria evaluated include:
- Whether the company has a physical presence in the state
- Whether the company has employees in the state
- Whether the company accepts orders in the state
- Whether the company has a bank account in the state
This is not a complete list and different states may have different criteria. However, these are some common factors to consider when trying to determine whether it is necessary for your corporation or limited liability company (LLC) to file for foreign qualification. For questions regarding whether your particular company needs to foreign qualify, it is best to seek the advice of an attorney or accountant.
Q. What paperwork is required to foreign qualify?
A. In order to foreign qualify in another state, you must complete a business filing for a certificate of authority, which is a document that grants a foreign corporation or limited liability company (LLC) permission to transact business in that state. In addition, most states require a certificate of good standing from your state of formation before granting a certificate of authority. The certificate of good standing is a document that states your company has met all the necessary requirements for corporations or LLCs imposed by your state of formation.
Q. What fees are required to foreign qualify?
A. Each state imposes a business filing fee that must be paid when the certificate of authority is filed. These fees vary by state and by entity type. Additionally, foreign corporations and limited liability companies (LLCs) are required to pay taxes and annual report fees both in the state of formation and also in the state(s) of qualification on an ongoing basis.
Q. Who can file a foreign qualification?
A. There are no restrictions as to who can submit a foreign qualification business filing. Anyone who prepares and files the certificate of authority and completes any additional requirements (i.e. providing the certificate of good standing) with the appropriate state agency is eligible to foreign qualify a business in that state.
Q. Do I need an attorney to file a foreign qualification?
A. No, an attorney is not a legal requirement to foreign qualify a business. You can prepare and file the certificate of authority yourself; however, you should understand the requirements of your intended state of qualification.
You can use our business filing service to foreign qualify and save money on attorney fees. However, if you are unsure if a foreign qualification is required for your business, consult an attorney or accountant.
Q. What information is required on the certificate of authority?
A. As with the formation documents, the information each state requires in the certificate of authority differs. Commonly required information includes:
- Company name
- Date and state of formation
- Name and address of registered agent in the state of qualification
- Name and addresses of officers (for corporations)
- Number of authorized shares and a listing of the different classifications of stock (for corporations)
- Signature of a corporate officer (often the president) or member/manager information (for LLCs)
Additional information is also requested by some states:
- Names and addresses of directors (for corporations) or members/managers (for LLCs)
- Duration of the corporation or LLC (which is often perpetual)
- Number of issued shares of stock (for corporations)
- Financial information, including information on assets
- Specific business-purpose clause outlining the type(s) of business the company will undertake
Q. What happens if my company name is not available in the state where I'd like to foreign qualify?
A. If your name is not available in the state of qualification, we will notify you and ask for a second name choice. You may also file for a doing business as (DBA) name, also called a fictitious, assumed or trade name, for your company in the state of qualification to transact business using a name other than the name on your certificate of authority.
Q. What are the consequences of not foreign qualifying?
A. There are a number of things that could happen as a result not foreign qualifying your company in states where you are transacting business. You lose access to that state's court system until you file a foreign qualification. This means if an employee or customer within a state in which you are transacting business were to sue your company, you would not be able to defend the lawsuit in that state's courts, because your company is not recognized as a business there. Typically, if this happened, your company would be given time to undertake the qualification process in order to allow you to defend such a lawsuit.
The second consequence of not foreign qualifying your business is that if this is later discovered, your company will typically be subject to fines and penalties, as well as being liable for the back taxes for the period in which it transacted business in the state without being foreign qualified. If your company is going to be transacting business in any states outside your state of formation, you need to foreign qualify it in those states. Because what is considered transacting business can be a gray area, you should seek the advice of an attorney or accountant if you have questions as to whether your company is or will be considered to be transacting business in a particular state.