Foreign Qualification Service in USA
Any corporation looking to diversify its business in other states needs to go through the procedure of foreign qualification service in the USA. Here, the term 'foreign' seems like an international concept, but this signifies operating business in a different state other than its place of incorporation in the USA. The idea of foreign qualification service in the USA applies to all entities such as Corporations, LLCs (limited liability companies), INCs, LLPs (limited liability partnerships), LPs (limited partnerships).
What is the definition of Foreign Qualification?
The term 'foreign qualification' signifies the registration of business in any state other than the state of its incorporation or formation. Any corporation is considered as domestic only in the state of its formation and not in any other state. For instance, any corporation being formed in California shall be considered domestic only in California. So in order to legally acknowledge the business and further growth opportunities in another state than its formation, the foreign qualification service in the USA is required. Through foreign qualification, a certificate of authority is issued to the corporation in a particular state. With that, organizations are not required to set up a new entity in a different state but can continue the business operations with the same brand and company in the new state.
Why is it important to get Foreign qualification service in the USA done?
Any corporation, which wants to carry out work in a state other than its domestic state is required to take permission from the state's authority. This is to ensure the following:
- It helps to provide necessary information about the entity to the general public. Such information includes legal name, business address, nature of the business, authorized person, and other relevant details of the corporation to provide authenticity.
- It ensures that foreign corporations do not get an unfair advantage over domestic entities w.r.t. Taxation and other reporting standards and requirements. The state can also impose a specific requirement for the qualification of foreign entities. As every state in the USA has different rules and guidelines, so the state can also ask corporations to maintain a registered office address along with the authorized agent.
When Does Your Business require foreign qualification in another state?
If you want to operate a business in a state other than its incorporation, the foreign qualification service in the USA is required. Here are the following factors that determine foreign qualification service in the state:
- In case, the corporation wants to extend its business in another state.
- In case, the corporation has employees in another state.
- In case a company accepts orders from a different state and have liability to pay that state tax.
- In case a company wants to buy a corporate office or property in another state.
Outcomes of not following foreign qualification service in USA:
There are certain additional obligations that corporations have to follow to get qualified as a foreign entity. That includes additional expenses that corporates need to bear to meet reporting obligations and other fees of the internal state as well as of foreign state. But if corporate wants to enlarge its business in new lands, then it is necessary to make these additional requirements. And in case of non-compliance state may impose specific penalties and can even deny foreign qualification certification to the company.
Procedure of Foreign Qualification service in the USA
If you want to establish your business in another state, it is important to go for foreign qualification. Steps to obtain foreign qualification certification are as mentioned below:
Step 1 – Appointment of a registered agent in the respective state
The first step is to appoint a registered agent in order to start a foreign qualification service in the USA. The agent is responsible for receiving and collecting documents on behalf of the corporation and further applies for registration of foreign qualification application with the concerned authority. The agent is accountable for the submission of documents and further receives communication from the State Secretary for foreign qualification service.
Step 2 – Name availability search
Even if your company is already registered with the same name, it is important to check the name availability of the company in a concerned state where the company wants to take foreign qualification certification. This is done by checking the company's name on records of State Secretary, which qualifies the company's legality w.r.t its name and to start a business in the respective state. It means the name is not deceptive or similar to any preexisting company in the concerned state. If the name is available, then the company needs to apply for a name approval application with the respective authority to reserve the same.
Step 3: Submission of certification of the existence of the domestic state
State laws vary from state to state, so certain states in the USA may require companies to submit the certificate of existence from the domestic state. This is to authenticate and validate the actual position of the existing company before giving the go-ahead for foreign qualification registration. This certification is referred to as a certificate of good standing in most of the states. The certificate of good standing checks the company's position that whether the company is in a decent financial situation. It signifies that the company has paid all dues, taxations, and has filed annual reports with the state authority on time.
Step 4: Filing of qualification documents with authority
The next step is to file an application for the foreign qualification process with the respective authority of the state. This responsibility is given to a registered agent appointed in the state. Before filing, it is important to check the prescribed rules and guidelines of the respective state in order to avoid any penalty. The process resembles the procedure of filing articles of incorporation with the state.
What information needs to be included while filing an application for a foreign qualification process in the USA?
Here is the list of the basic documents that are required to be filed with foreign qualification application as mentioned below:
- Name of the company incorporated in the domestic state.
- Place and date of incorporation of the company.
- Registered office address and another place of business address in the domestic state.
- Name and address of directors, owners or other key officials of the company.
- Description of shares and allotment in the company.
- Type of organization, i.e. whether LLC, LLP, LP, or Corporation.
- Authorization from the director to initiate the process of foreign qualification in another state.
- 8Any other information as required.
Important Facts That You Need To Know Before Your Foreign Qualification:
There are some basic things that you need to know about the foreign qualification before you go for it. Let us have a look at a few of them:
- Before conducting any kind of business, you need to submit your registration to a state twenty (20) days before. This way, you can get your paperwork completed, and your certificate would also be issued within time.
- You should try to pursue your business only in that state where you can responsibly meet the requirements. You will also be required to file the annual information reports to the state where you have been pursuing your business. For this, you firstly need a certificate of good standing.
- As every state has different regulations, it is important to check the rules and guidelines of the respective state before applying for foreign qualification. There might be certain additional compliances that companies need to follow in a few states.
- A lot of people doubt the costs that would be involved in obtaining a certificate of authority. However, it depends on the state to state how much cost they would ask from a particular business corporation so as to give them the allowance. As every state has different regulations, it is important to check the rules and guidelines of the respective state before applying for foreign qualification. There might be certain additional compliances that companies need to follow in a few states.
- Once your foreign qualification is filed, the functioning state agency would return the copy back to you of all the filed papers. These documents would be mailed to you soon after.