Foreign qualification is how a given state permits an entity, such as a corporation or limited liability company, from elsewhere to do business in that state. In this context, “foreign” can mean from another state or from a different country.
Recently, one of my international clients formed a corporation in Delaware. We have been qualifying that corporation to do business in about a dozen other states. This post explains how easy, or how difficult, various states makes the foreign qualification process.
Easy Foreign Qualification
States have an incentive to make qualification easy:
- The easier the process,
- The greater the number of entities that will go through the process, thus
- The more business those entities will conduct in the state, and
- The more revenue the state will receive from fees, taxes, and the like.
Indeed, most states do make foreign qualification easy. One need simply:
- Provide six or eight pieces of information (entity name, date of formation, etc.) on a printed form or online;
- Choose a registered agent; and
- Pay the registration fee.
Somewhere between one day and several weeks later, the entity has qualified to do business in that state.
However, some states make foreign qualification difficult. I will discuss three of those states below.
Arizona’s Application for Authority requires up to 18 fields of information for each entity. This is much more than most other states demand. Furthermore, that form requires full contact information for each director and each officer!
In addition, Arizona requires:
- A Certificate of Disclosure, concerning key individuals (officers, directors, major equity holders, etc.). One must note whether any have been involved in a variety of types of legal proceedings. These include felony convictions, court orders concerning fraud, involvement in another corporation’s bankruptcy, etc.).
- The registered agent needs to sign a Statutory Agent Acceptance form.
None of this is terribly difficult, but it is time-consuming.
Louisiana requires that all business registrations be done online using geauxBIZ (clever name, in my opinion).
Hassles include the following:
- The state’s printed Application for Authority, which is available solely for reference, is misleading because geauxBIZ requires more-detailed information.
- One must provide full contact information for all directors and officers.
- One must enter the president’s social security number. Not only is this is an uncommon invasion of privacy. This is a problem for my client who is not a U.S. citizen, thus he lacks an SSN. (Possible workaround: 999-99-9999.)
- An officer must submit the application, and the officer’s signature must be notarized!
This last requirement was a deal-killer for my client’s sole officer, who is not in the U.S. We did not qualify the corporation in Louisiana.
Ohio’s Application for License is not overly demanding as concerns providing information.
However, Like Louisiana, Ohio requires notarizing the officer’s certification. So, we did not qualify the corporation in Ohio, either.
In summary, most states make foreign qualification reasonably straightforward, but a few outliers make the process significantly more difficult.
Check out all posts about legal entities.
Dana H. Shultz, Attorney at Law +1 510-547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.