Foreign Qualification Services in USA: A Complete Overview

Sakshi Sharda

27 Jun, 2020

For diversifying business in other states, all the Corporations are required to go through the process of Foreign Qualification Services in USA. Here, the term ‘foreign’ appears to be an international concept; still, this term means operating a business in a different state other than the original place of Incorporation in the USA. The concept of Foreign Qualification Services in USA is applicable to all entities such as Corporations, INCs, LLCs (Limited Liability Companies), LLPs (Limited Liability Partnerships), and LPs (Limited Partnerships). In this article, we will discuss in detail the complete overview of Foreign Qualification Services in USA.

What are Foreign Qualification Services in USA?

Foreign Qualification means the registration of a Corporation in any state other than the state of incorporation or formation of the Corporation. Any Corporation is always considered as domestic only in the state of the incorporation or formation of the Corporation and not in any other state. For example, any Corporation which is incorporated in California should be considered as domestic only in the state of California.

The Foreign Qualification Services in USA are required to legally acknowledge the business and the further expansion or growth of the business in other state. Through Foreign Qualification, an authority certificate is issued to the Corporation in a specific state. With such a certificate, the Corporations are not required to set up any new entity in a different state. Still, they are allowed to continue all the business operations with the same Company and brand in the new state.

For the owner of the business, after the completion of the process of Foreign Qualification Services in USA, will allow a Corporation or LLC to lawfully do business outside in other state and in the domestic state in which the Company was incorporated. Foreign Qualification Services in USA for a state is a way of generating tax returns in exchange for the privilege of commencing a business there in a particular state.

There are no restrictions on who can submit a filing of Foreign Qualification. Any person who does the preparation and filing of the Certificate of Authority and also completes all essential additional requirements, such as providing the Certificate of Good Standing to the proper agency of the state, is qualified or eligible to have Foreign Qualification of his/her business in that particular foreign state.

Greenbush Telecom Inc. is a telecommunications company that provides services in 4 other states. Greenbush Telecom was incorporated and also maintained its headquarters in Georgia. The Company also offers its services in the states of Alabama, Florida, and Tennessee by retaining workers in these states. The Greenbush Company has employees and offices and in these other states too, and it also offers services and receives orders from the residents of these states, as mentioned earlier. Probably, Greenbush Telecom Company is required to get Foreign Qualification Services in Alabama, Florida, and Tennessee.

What are the essential requirements for obtaining a Foreign Qualification Services in USA in another state?

Any person who wants to operate a business in a state other than the state in which the incorporation of business was done, the Foreign Qualification Services in USA is required for the same. The essential requirements for obtaining a Foreign Qualification Services in India are as follows:

• The Corporation should want to extend the business in another state.
• The Corporation has some employees in another state.
• The Company is accepting orders from other state and also have the liability to pay the tax of state.
• The Company has an intention to buy a property or corporate office in another state.

What is the procedure of obtaining Foreign Qualification Services in USA?

The procedure of obtaining Foreign Qualification Services in USA is as follows:

Name Availability Search

The person going for the foreign qualification process is required to conduct a name availability search^[1] in the state of qualification. This name search will tell the legal name of the Company. This legal name of the Company is on the formation document of the Company. The legal name is available for the person applying for Foreign Qualification Services in USA to qualify and accordingly do business.

Name being generally available does not mean that the name is already on the records of the Secretary of State or other business filing offices belonging to other foreign or domestic business entities or, in some other states, where the name is not deceptively similar or identical to another name available on the records of the state.

If the legal name a person has chosen for a business is available, then he/she should reserve such a name. Such a reservation makes sure that no other entity will take the name before the person has a chance to file his/her documents of qualification. If the name desired is not available, the Company is required to qualify under the prescribed manner and use a “fictitious name” for the Company in that state.

Appoint a Registered Agent in the state

The registered or authorized agent is a company or an individual whose primary function is to obtain service of procedure and all other essential documents of court on behalf of the LLC, Corporation, sole proprietorship, or other business entities for which the registered or authorized acts as agent. The location of the registered or authorized agent in the state is often called the registered office.

The registered or authorized agent also receives certain significant communications from the Secretary of State. It is always considered a good idea to appoint a professionally trained registered or an authorized agent for a company rather than an employee, owner, or any other individual.

The person applying for the Foreign Qualifications Services in USA should appoint a professional registered or authorized agent to be sure that in the future, there will be someone at the registered office to do the required work and receive essential documents during the working or business hours.

The professionally registered or authorized agents have knowledge and proficiency in managing all these necessary documents and then later on forwarding these documents quickly to the people who can accordingly work and take the required action on behalf of the Limited Liability Company, Corporation, or any other company.

Order a Certificate of good standing from Home State or Certificate of Existence

Before the grant of approval for the Certificate of authority, several states always want to ensure that the Company is in good standing in the state of incorporation or formation. Mostly the foreign states require the submission of a Certificate of good standing or a Certificate of Existence or Certificate of status.

This Certificate of good standing, which the foreign states require, is basically a declaration that the Company has already met all the essential requirements for LLCs, Corporations, or any other entities, which was imposed by the state of incorporation or formation.

The companies that fall out of good standing often fail to file their annual reports or fail to pay their contract taxes. If any company is not in good standing, the owner of the Company is required to get the Company to return to good standing by filing all the necessary annual reports that are due and pay all the required taxes that are due, along with the penalties and interest (if any).

File the Foreign Qualification Documents

The person applying for Foreign Qualifications in USA is required to fill and file an application for a certificate of authority in that particular state. This process is similar to filing the Articles of Organization or Articles of Incorporation. The proper documents are required to be prepared and filed with the prescribed appropriate state fees, which is to be paid. In some states, such required documents can be done online, while in some other states, the documents can also be mailed.

Our Recommendation: Company Registration in USA: Step by Step Procedure

What are the documents required for Foreign Qualifications Services in USA?

Each state in the USA requires certain essential documents information for Foreign Qualification Services in USA:

• The name of the Company;
• One fictitious name of the Company, if in future this name qualifies and do business;
• Date of Incorporation of Organisation;
• State of Incorporation of Organisation;
• Address of the business of Corporation in the state;
• The name of officers for the Corporations or members for LLCs;
• The addresses for the Corporations or members for LLCs;
• The total number of approved shares and an overall listing of the different classifications of stock for the Corporations;
• The type of management for the LLCs;
• The principal address for communication where the Corporation is located;
• Name of the registered or authorized agent in the state of Foreign Qualification;
• The address of the registered or authorized agent in the state of Foreign Qualification;
• Signature of a corporate officer, often the president (for corporations), of a member or manager (for LLCs) or general partner for LPs or LLPs;

There is some additional information that is required in some states. Examples of such additional information include the following:

• The names of directors for Corporations;
• The addresses of directors for Corporations;
• The total duration of the LLC or Corporation;
• The total number of the issued shares of stock for Corporations;
• The essential financial information, including the information or data on assets;
• The Specific clauses related to the business-purpose outlining the kinds of business the Company can commence;

What are the effects of non-compliance with the Foreign Qualification Services in USA?

The Corporations are required to have certain additional obligations to get competent or qualify as a foreign entity. Such additional obligations include some additional or extra expenses that the corporates are required to bear to meet the reporting obligations and other required fees by the internal state as well as of the foreign state.

But in a case where the corporate wants to expand its business in new domains, then it is very necessary to make the above-mentioned additional requirements.

In the case of non-compliance with all obligations, as mentioned earlier, the state can enforce some specific penalties. The state can also even repudiate the certification of Foreign Qualification Services in USA to the Company.

What are the benefits of Foreign Qualification Services in USA?

Any corporation, which wants to do business in a state other than the state in which the Corporation was incorporated is required to take certain permission from the authority of the state. The benefits of Foreign Qualification Services in USA:

• The Foreign Qualification Services helps to provide essential information about the Corporation to the general public. Such essential information includes legal name, address of the business, nature of the business, a person authorized, and other relevant details of the Corporation to provide validity.
• The Foreign Qualification Services ensures that no unfair advantage is given to the foreign corporations over the domestic entities with respect to Taxation and any other reporting requirements and standards. The state in the USA can also impose some requirements for the qualification of Foreign Corporations. Each state in the USA has different guidelines and rules, so the state may also ask the different Corporations to maintain a proper address of registered office along with the registered or authorized agent.

Conclusion

Also, read: Professional Corporations in USA: A Complete Overview