Register your company to do business in other states
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Corporations, LLCs and other business entities formed in one state, may need to register to do business in other states as well. If your business is going to have locations in other states or if it is considering doing business in another states, it should find out if the company needs to “qualify” to do business, or “register” to do business in that state before transacting business there.? Almost all states require that a “foreign” entity (meaning a corporation, LLC or other entity that was incorporated or organized in another state in the U.S.) must register or qualify in that state as required by state law before it begins doing business.? What the state law defines as “doing business” in that state, will determine if qualifying is necessary.? Certain activities are considered “doing business” while others are not.?
For example, some states will require that a business register if it has an office location in that state, or even if it has a bank account in that state. Some states will require registering if there are any employees in that state, or if it produces its products there. Each state is different and the laws of the particular state will need to be referenced to determine if registering is necessary. Many states have laws that exempt certain types of minimal activities, but the law can be complex. For example, California’s Corporation Code exempts certain activities from being deemed to “transact intrastate business”, such as having a bank account, or holding a board or shareholder meeting, or having independent sales agents in California. However, relying solely on the Corporations Code would be flawed, as California’s Revenue and Taxation Code, Section 23101 provided that "doing business" means actively engaging in any transaction for the purpose of financial or pecuniary gain or profit, which is much more broad than the Corporation Code. These kinds of conflicting laws make it difficult to determine for certain whether you are required to register in a state or not without consulting an attorney.
What happens if you fail to register in a state where you are doing business? The fines and penalties are different in each state, but some examples include (1) being unable to enforce an agreement in court in that state, (2) being able to rescind a contract entered into with another party that was supposed to be qualified at the time the contract was executed, (3) inability to protect the officers of the company from liability, and (4) monetary fines and penalties.
Besides registering the business with the Secretary of State, there could also be other registrations or licenses required when operating in another state, even if the company is not required to “qualify” under the corporate laws of the state, such as business licenses, sale and use tax permits, employment tax registration, workers compensation requirements, tax withholdings, property taxes, etc. All registrations, licenses and permit should be fully explored before beginning operations in any state.
To register or qualify your business in another state, there are filings that need to be made. Most states require a form be completed with your basic company information and then filed in the state with a filing fee. You can find these forms on the state’s Secretary of State website. One thing to keep in mind is that in each state to register there, the name of your company cannot already be taken by someone else. If the name is already taken you may be required to also register using a “dba” or fictitious business name. See our incorporation guide for links to the Secretary of State websites for all 50 states.
This site is for informational purposes only and does not constitute legal, financial or tax advise. The information on this site should not be relied upon as an official source of information and should be independently verified.