Foreign Registration – A Detailed Overview

Introduction to Foreign Registration

Most companies operate primarily within their state of incorporation. However, If you plan to expand your business into other states, you must know about “foreign registration,” also called “Foreign qualification .”Foreign Registration sounds more like an international registration than a United States Registration, which can be confusing. Foreign Registration refers to a state or jurisdiction other than the entity’s state of formation. For example, a Philadelphia, PA business may also provide services across the river in Camden, NJ. In situations like this, the organization is considered foreign in New Jersey and must file a Foreign Registration in New Jersey and with each additional state of operation.

When is Foreign Registration or Qualification Required?

States generally require foreign qualifications when an out-of-state company conducts business in their state. The definition of conducting business varies by state and often covers a broad range of activities. Common triggers for when a foreign registration may be necessary include:

• Opening a new office or another facility.
• Hiring an employee who is a resident of the Foreign state (Even if working from home).
• Purchasing new property or a building.
• Offering services, selling products, accepting orders, or bidding for a contract.
• Applying for a professional license, as licensing agencies generally require foreign qualifications. For example, nonprofits applying to solicit charity donations may need to also register as a foreign companies.
• If your company provides products that require a collection of sales tax

Please note this is a partial list, and the state statutes vary by state for what constitutes transacting business. It is recommended to get the advice of a professional, such as an attorney, CPA, or consultant, to determine whether your business needs to foreign qualify in a particular state. When in doubt or if there is a grey area, consider Registration.

Why does a company have to Register as a Foreign Entity?

A company cannot merely transact business in states other than its home state because it wants to and may subject itself to fines or penalties if it ignores state requirements. A company doing business in another state needs the other new state’s permission to conduct business.

From the state’s perspective, foreign qualifying (also known as foreign Registration) ensures that the public is aware and has access to essential information about a company it may conduct business with. Essential information shared includes the business’s legal name, physical and mailing address, key officers or members, and the name and address of the registered agent.

Foreign Registration is also required so that foreign companies do not receive an unfair advantage over the state’s domestic companies, which might be subject to tax and reporting requirements. By requiring Registration, the states can also impose these requirements on foreign entities, leveling the playing field for state-domiciled and foreign-domiciled companies. 

Consequences of not Registering as a Foreign Company

There are additional costs to your company if you have to foreign register. You will have initial Registration and ongoing renewal fees and reporting obligations from your state of formation and foreign registration states.

Fines and penalties

You may consider these additional responsibilities taxing. However, if your growth plans include expanding into new states, these fees and other reporting requirements will become an ongoing cost because state laws require foreign companies doing business within their borders to register. And they will penalize those who must comply with their foreign qualification requirements.

How to Foreign Register or Qualification?

To register a business in another state, you must do so with the secretary of the state office of the new state. It’s typically the first step in expanding a business to a new state. It will allow your company to legally pursue expansion opportunities across state borders without incorporating a new business entity. 

Once you register as a foreign entity in a state, the secretary of state will issue a “certificate of authority” or similar document. After the entity’s Registration with the secretary of state, you will need to navigate tax registration, state-level business licenses, and more.

Considerations for Nonprofit Organizations

Nonprofits may also need to file for charity registration to solicit donations within the state of foreign Registration. Charity Registration, sometimes called a Permit to Solicit, is required to ask people and companies for donations in the state of operation. In other words, without filing a Charity Registration, a nonprofit cannot legally ask people for donations. Typically, this Registration is filed at the office of the Attorney General.

The organization usually files for Charity Registrations after submitting its federal tax-exempt application. However, some states require an IRS Letter of Determination to register as a charity. Since the organization can only legally ask for money once registering as a charity, it’s imperative to apply for federal tax-exempt status as quickly as possible.

Soliciting funds without a Charity Registration puts the organization at risk for hefty fines from the state.

Required Documents when Registering as a Foreign Company

Each state requires different information to apply for Foreign Registration. Typical information includes the following:

• Company name (and, if required, the DBA or fictitious name it plans to use)
• Date and state of incorporation/organization
• Specific business purposes, outlining the company’s business type (s).
• Address of the business in the state
• Principal/Physical address in the state of domicile
• Name and address of the foreign registered agent (Foreign Registration).
• Name and addresses of officers or members (for LLCs)
• Signature of company officers.

Costs and Processing Times

The state fees and processing times depend on the state and type of entity. The fees commonly range between $100 and $300 for initial Registration. 

Processing times vary by state. Most states offer expedited options, and some have multiple expedited service levels. In general, it takes 5-15 business days. Some states can take 30+ business days, and seasonality also can impact processing times. For example, most states are busy the first 3-4 months of the new year.