What is Foreign Qualification?

“Foreign qualification” refers to registering your business with the secretary of state office of another state. It enables your company to legally pursue growth opportunities across state borders without having to incorporate a new business entity. It’s typically the first step in expanding a business to a new state.

Once you foreign qualify in a state, the secretary of state will issue a “certificate of authority” or similar document. After the entity is registered with the secretary of state, you navigate tax registration, state-level business licenses, and more.

Visit our 50-State Reference Chart to find fees and processing times in every state.

When Foreign Qualification is Required

States generally require foreign qualification when an out-of-state entity conducts business in their jurisdiction. The legal definition of conducting business varies by state and often covers a broad spectrum of activities. Common reasons why businesses foreign qualify include:

  • Hiring an employee who is a resident of a state other than the state of incorporation.
  • Purchasing property or a building.
  • Opening a new office or other facility.
  • Offering services, selling products, or bidding for a contract.
  • Applying for a professional license, as licensing agencies generally require foreign qualification.

When Foreign Qualification is Typically Not Required

While each state’s specific requirements for foreign qualification vary, scenarios that generally do not require foreign qualification include:

  • Isolated transactions and activities, which are usually less than 30 days.
  • Secondary corporate activities, which include conducting internal affairs, maintaining corporate books or records, or evaluating business prospects in a state.
  • Opening or maintaining a bank account.
  • Wholesalers that have relationships with dealers in foreign state where the wholesaler has minimal involvement in the activities of its dealers.
  • Engaging in a partnership or joint venture.

Steps to Foreign Qualify

The process of foreign qualifying involves first obtaining a good standing certificate from your home state. You will submit that document to the new jurisdiction along with an application for certificate of authority. It is necessary to appoint a registered agent, which maintains a physical address and receives legal documents for your company.

Costs and Processing Times

The state fees and processing times depend on the state and type of entity. The average state fee to qualify a business corporation is $230 while the average fee to qualify a limited liability company (LLC) is $190. Nonprofit corporations have an average fee of $100.

Processing times vary widely by state. Most states offer expedite options and some states have multiple levels of expedited service. Some states take upwards of 5 weeks to process filings however those states generally offer expedite options for processing in 1-2 business days.

Visit our 50-State Reference Chart to find fees and processing times in every state.

Certificate of Authority - A document issued by secretary of state offices showing that an entity has completed foreign qualification and is authorized to do business in that state.

Foreign Entity - Any business organization that transacts business outside of its state of formation is recognized as “foreign” in the states in which it obtains a certificate of authority.

Foreign Qualification - Refers to registering your business or nonprofit outside its state of formation.

Registered Agent - A legal appointee that receives notice of lawsuit and other legal notices for a business at a physical location within the state.

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