If you plan to operate your business, open a bank account, hire an employee, hold an asset, etc., in any state other than the state of incorporation or organization, you may be required to foreign qualify.

You will need to file a Certificate of Authority application, which sometimes called a Statement & Designation by a Foreign Corporation, with the particular state’s Secretary of State Office to register your company in another state. If you hired an incorporating company, they can handle the filing for you. Or you can do it yourself by downloading the form from the Secretary of State’s website. Some states will require you to have a certificate of good standing from the state where your LLC/corporation was formed. To receive a certificate of good standing, you’ll need to be up to date on your state tax return filings, tax payments, etc.

Foreign qualifying your company in states where you conduct business is important because it is your legal obligation. Failing to properly register your company could result in:

1. Fines and interest for any time when you were not foreign qualified (in addition to paying the standard fees that should have been paid)
2. Liability for back taxes for the time when you were not foreign qualified
3. Inability to sue in a state where you are not registered

Although you cannot overlook your business’s legal requirement to foreign qualify, it is recommended that you foreign qualify in as few of states as possible to minimize various filing requirements, annual fees, and added paperwork.

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