Small Business 101: How To Properly Operate Out Of State

Geographical boundaries don’t always matter in today’s market. The internet allows businesses to hire and sell across time zones and continents. However, it’s especially important to guarantee compliance with all legal requirements when expanding into a new state. This might sometimes mean registering your company as a “foreign corporation” in the new state. Small Business 101: How To Properly Operate Out Of State

Continue reading to find out if a foreign qualification is required if your company operates across state lines or if you’re thinking about growing your clientele.

What’s the definition of doing business in another state? Small Business 101

Be aware that just having a client or selling to customers in another state doesn’t necessarily mean you’re operating in that state and must register as a foreign corporation (or LLC). While exact requirements vary from state to state, operating in a state generally means: Small Business 101: How To Properly Operate Out Of State

• Having a bank account in the state
• Selling in the state through some party directly tied to your business (a distributor or sales rep)
• Owning property in the state
• Having offices, facilities, or holding regular meetings in the state

Let’s take a look at a few examples on Small Business 101

. Michael runs a small consulting business based in New York. Despite serving clients outside New York, Michael’s company is likely not operating out of state at this point. However, once Michael opens a small office with an employee or two in California, he will probably be considered doing business there and will have to file a Statement and Designation by Foreign Corporation form with the state.

In another scenario, Jennifer launched a software business. She lives in California but wanted to take advantage of Nevada’s lack of state income tax, so she incorporated her business in Nevada. Given that her business is physically located in California, what are the requirements for filing as a foreign corporation? that’s where her office and employees reside ? her business needs to file as a foreign corporation in California (and, her company will also be subject to all the regulatory and tax requirements of California too!)

What is required to file as a foreign corporation? Small Business 101

Foreign Corporation paperwork is relatively similar for each state, although the names may differ. In some states, it’s called the Statement and Designation; in others, it’s the Foreign Qualification application. Take a look at your state’s Forms and Fees page (generally part of the Secretary of State’s office) to determine what the correct form is for your new state. Small Business 101: How To Properly Operate Out Of State

In essence, the foreign corporation paperwork will resemble the Articles of Incorporation document you first used to file your corporation. Some of the information will include the name of your corporation, your domestic state, stock information (how many shares were authorised, etc.), a list of corporate officers, the registered agent, and the principal office or location you’ll be using in your new state.

In most states, you’ll also be required to have a Certificate of Good Standing document. Your domestic state, where you incorporated, produces this document to confirm your corporation’s active status. If your corporation does not currently have an active status, it is most likely because you did not file an Annual Report or another required filing, and this can be easily remedied by submitting a form and paying a fee.

How to file a foreign qualification on Small Business 101

Just like other corporate filings, you have several options depending on your budget, available time, and level of comfort when dealing with legal forms. You can register your foreign corporation on your own by going directly to the secretary of state’s office. If you aren’t certain about the requirements (and have the budget), you can hire a corporate attorney to register your foreign corporation for you. The third option is to use a legal document filing service. This is a good option is you’re fairly confident about what you need, would prefer to spend your cash on something other than attorney retainer fees, but would like some professional help in tracking down all the necessary paperwork and making sure all the i’s are dotted and t’s are crossed. Small Business 101: How To Properly Operate Out Of State

Whatever method you choose, be sure to take your legal obligations seriously when crossing state borders. Filing upfront will be simpler and far more affordable than having to deal with the ramifications of operating improperly. Small Business 101: How To Properly Operate Out Of State