Your company is growing and you’ve begun to expand your activity outside your home state. It’s time to ask yourself whether you need to “qualify” to do business in those other states.
In order to conduct business legally in a “foreign” state (any state other than your state of formation), you must first qualify to do business there by filing with the Secretary of State’s office or its equivalent and paying a fee. In order to maintain good standing in that state, you’ll need to file an annual report and may also be required to pay franchise or income taxes.
Qualifying to do business in other states is a cornerstone of good corporate governance. Companies that fail to qualify risk a host of potentially adverse consequences, ranging from monetary fines and penalties to breach of contract claims, issues regarding the enforceability of existing contracts, the inability to initiate litigation or file a counterclaim, financial statement ramifications and even personal liability for directors and officers.
Not all activities require you to qualify to do business in foreign states. Certain activities deemed to be “regular, systematic, extensive and continuous” trigger the need to qualify, while others, such as isolated transactions, collecting debts and interstate commerce, do not. You will need to take a careful look at your business activities to figure out whether or not you need to qualify.
The CSC® 50-State Guide to Qualification
Determining whether to qualify to do business in a foreign state can be a complex and time-consuming task, but it needs to be done in order to avoid the harsh consequences of making the wrong decision. Qualifying to Do Business in Another State: The CSC® 50-State Guide to Qualification is a comprehensive toolbox that can help you make that determination.
This easy-to-read handbook provides you with the information you need to make the important decisions about qualifying in states where you plan to do business, and includes case studies that can help you understand which types of business activities trigger the qualification requirement.
The book begins with a look at the Model Business Corporation Act (MBCA), which serves as a template for most states’ laws governing foreign corporations’ business activities within their borders. It next examines the activities listed in the MBCA that are not subject to regulation, and then those activities that require a foreign corporation to register to business. There is also a discussion of how Internet and e-commerce activity could trigger qualification requirements.
There are detailed instructions for qualifying to do business in foreign states as well as registration procedures for charitable organizations. The appendix contains a list of qualification forms for all 50 states and the District of Columbia, with forms on the companion CD-ROM.
The handbook also includes a comprehensive scope of annotated qualification statutes for all jurisdictions, giving readers easy access to the current statutes and relevant case notes that relate to doing business in a foreign state.
Two easy-to-use charts summarize the activities that do not constitute doing business and the consequences of failing to qualify. Both charts include comments and citations.
Each year, the Qualification Handbook is updated with new case illustrations and important legislative changes. In this Edition, new case examples have been incorporated to further illustrate activities that do and do not require qualification. Changes to qualification statutes for all 50 states and the District of Columbia have also been captured in the book’s statutory section.
The 2018 Edition of Qualifying to do Business in Another State is available as a softbound book or as an ebook, compatible with dedicated e-reader devices, computers, tablets and smartphones that use e-reader software or applications. It is also available on the LexisNexis Digital Library.
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To learn more about the 2018 Edition of Qualifying to do Business in Another State, call 1.800.533.1637 or visit us online at www.lexisnexis.com/csc.