What is a Foreign Qualification?
A foreign qualification, sometimes called a certificate of registration, is the process of registering a corporation in another state as a foreign entity. Foreign qualifying a company means that you are registering to conduct business in a state other than the state where you originally formed your businesses. This allows you to do business in this state in addition to your home state, and sets up the structure needed to pay applicable state fees and taxes.
What are the steps to foreign qualifying a business?
When you register to conduct business in another state, there are a few important steps you will want to follow. First, you want to apply for a certificate of good standing from the state of incorporation. Basically, this is verification from the state that your business has met its tax and business filing obligations. Next, you need to file your foreign qualification documents with the state where you would like to do business.
When does my business need to file a foreign qualification?
If you are unsure about whether you should file a foreign qualification for your business, ask yourself these questions to decide:
- Does your business have a physical address or presence in the state?
- Does your business conduct business in the state?
- Are you paying employees in another state?
- Does your company hold any assets in the state?
- Have you opened a business bank account in another state?
If you answered yes to any of these questions, chances are a foreign qualification is right for you. However, we are unable to provide legal advice so it's advised that you consult with an attorney who understands the details of your business and can help you make the decision.
What is a good example of a situation where a foreign qualification is required?
If your company incorporated in the state of Nevada, but has an office and employees in California (so it's essentially based in California), then you would generally have to file for foreign qualification within the state of California. In other words - you must apply for authority to conduct business in California.