How to register a business in another state

When a corporation or limited liability company (LLC) expands its operations into another state, it usually needs to register as a “foreign” business entity. This process, known as foreign qualification, ensures the business is legally recognized to operate in that state.

To qualify, a business must meet the legal requirements of each state where it registers. It also has to maintain good standing by following the state’s ongoing rules. While not every business activity across state lines requires foreign qualification, failing to register when required can lead to fines and other penalties.

What Is Foreign Qualification?

Foreign qualification is the process a business entity must follow to get the legal authority to do business in another state. The term “foreign” refers to other U.S. states in this context, not other countries.

• Domestic state: The state where the business was originally formed.
• Foreign state: Any additional state where the business seeks permission to operate.

The Secretary of State’s office in each state handles the qualification and registration of foreign business entities. A registered foreign entity must fulfill the same obligations as domestic businesses to remain in good standing, which typically includes the following:

• Reporting: Filing annual or periodic reports about the business’s management.
• Franchise tax: Paying franchise taxes and filing franchise tax returns.
• Registered agent: Maintaining a registered agent with a physical address in the state.

Failing to meet these requirements can result in administrative revocation of authority.

When Is Foreign Entity Registration Necessary?

A company must register as a foreign entity when it meets a state’s legal definition of “doing business” in that state. The specific requirements for each state vary. Generally speaking, a business meets this definition when it has a physical presence in the state or does a significant amount of business there, such as:

1. Employees: Maintaining people on payroll counts as a physical presence. This often includes remote workers.
2. Ongoing contractual relationships: A business frequently enters into contracts with other businesses or individuals in the state.
3. Frequent business visits: If a company routinely sends people to meet with customers, clients, or potential customers or clients in a state, it is probably “doing business” there.
4. Substantial business activity: A company with major revenue sources in a state might meet that state’s “doing business” definition. Individual transactions, such as direct e-commerce sales to consumers, might not count, but ongoing large orders might.

How Do I Register My Business as a Foreign Entity?

1. Check for Business Name Availability

The best-case scenario is that your business’s name is available in the foreign state. This means no one else is using the name or has reserved it.

Many Secretary of State offices have search tools on their websites that allow you to check name availability. If not, you may need to contact the office and ask them to check for you.

IF THE NAME IS AVAILABLE…

IF THE NAME IS NOT AVAILABLE…

You can reserve it in the foreign state for a limited time. This prevents others from claiming the name while you prepare your application to register as a foreign business. Reserving a business name typically involves filing a reservation request and paying a fee. The reservation might last around 120 days to one year. Some states allow you to renew the reservation one or more times.

You will have to use a different name in that state. The name can be similar to the existing one, but not so similar that it causes confusion. You can apply for a fictitious business name in the foreign state. This is commonly known as a DBA (“doing business as”). This will be your business’s official name in that state. It’s important to note that DBA filing requirements differ by state, as some require filing at the county level rather than with the Secretary of State.

2. Get a Certificate of Good Standing

You will need a Certificate of Good Standing from the domestic state. This demonstrates that your business is fully compliant with state law.

3. Choose a Registered Agent

You must appoint someone with a physical address in the foreign state to serve as your business’s registered agent. This can be an employee or a third party. Many companies offer registered agent services for a monthly or annual fee. Some states also require that the agent must consent in writing to the appointment.

4. Submit an Application for Registration as a Foreign Business

The application will ask for information about your business’s name, legal status, and qualifications. It is filed with the Secretary of State’s office, along with the Certificate of Good Standing and a filing fee. In many states, the filing fee is about the same as the fee to form a new business entity.

5. Receive Your Certificate of Authority

If the Secretary of State approves your application, it will issue a Certificate of Authority. The name of this document might vary by state. This certificate gives your business the legal authority to operate in the foreign state.

Expanding into a new state is an exciting step for many businesses, but the process can be complex. If you have specific questions about your situation or want guidance tailored to your business, a Legal Pro can help. With the right support, you can stay compliant and focus on growth.
 

Key takeaways A business that wants to operate in another state must register in that state as a foreign entity. “Doing business” generally means having a physical presence or a significant economic presence in that state. Registering as a foreign entity means qualifying under the foreign state’s laws. The business must remain in good standing by meeting the legal standards in its home state and all foreign states where it is registered.

Additional resources

• What is a Foreign Entity?
• When should I register a business in another state?
• How to move your business to another state