A Foreign Corporation is a term used for a business that sets up in one state and enters into another state to transact business there. The business would be considered Domestic in it’s home state and foreign in the new state. Any business that is set up and wants to branch out into other states must obtain authority to do so.
Here’s an example of how it works:
David is starting up a business in Delaware. He would like to do business in New York as well. He cannot simply start up business there without filing the proper documents. Your business filing is only good for the state you filed in, until you file for authority from the new state.
First, David needs to obtain a Certificate of Good Standing from his home(domestic) state of Delaware. If fees or reports are due to the state, the business may not be in good standing, and he will have to fulfill those requirements before getting back into good standing status.
Next, he would fill out and submit an Application of Authority (Also known as a Foreign Qualification), along with the Good Standing, to the new state. This process is basically asking permission from the new state to enter in and collect revenue.
Finally, after the business has received approval to enter, the business would be responsible for obtaining permits and/or licenses for that state as well. Additionally, the business is required to pay taxes and submit business reports when applicable. Also, some states, such as New York, require certain types of businesses to perform a publication requirement.
It is important to note a few more things about setting up a foreign entity. Most states mandate that the Registered Agent lives in the state the business is located. A Registered Agent is a person that can accept important documents that are mailed from the state. You can act as your own agent, or if you do not have a physical address in the state, you can use REGISTERED AGENT SERVICES
It is the business owners responsibility to maintain records and pay taxes in each new state it is registered in. The foreign entity does not receive a new EIN #, and does not need a new executive kit.
For more information about growing your business give us a call! We can obtain the Good Standing, draft & file the Application of Authority and provide Registered Agent Service to get you on your way to expanding your business!
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