Foreign Corporation Registration: What You Should Know Before You Register One for Your Business

If business is booming in your current market, you might be considering expanding into a new one. If that market is the neighboring county, no problem—just sign a new lease, set up a DBA (if you'd like to do business under a different name), and start it up.

But what if the new market you want to reach requires you to cross state lines? Before you throw open your doors for business, it's important to consider whether you're required to file as a foreign corporation.

The California Secretary of State's website defines "transacting intrastate business" (via the California Commercial Code) as entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce.

According to the Texas Secretary of State's website, in addition to noting that Texas statutes do not specifically define "transacting business," says, generally, that "a foreign entity is transacting business in Texas if it has an office or an employee in Texas or is otherwise pursuing one of its purposes in Texas."

These are just two examples of the nebulous direction received by Secretaries of State as far as your legal filing requirements. However, a good rule of thumb is that if only your customers are located in another state (for example, a small business located in one state that sells products online to customers not necessarily located in that state), you're not considered to be doing business in all possible states of all of your customers—but if you have employees and offices in those other states, you're probably considered to be doing business in the state. Again, it's always best to run your situation by a corporate attorney or legal advisor if you're not sure.

There are two key points to keep in mind as far as your corporate name:

1. Foreign corporations must abide by the same name availability rules as any domestic corporations—a foreign corporation cannot be registered if there is a corporation or LLC (whether domestic or otherwise) already registered with that same name.
2. If a company's legal name in its domestic state is available, most states require the foreign corporation to use that legal name in the new state—only if the name is not available can the corporation register using a different name.

Say your corporate name is Texas Trucking Services, Inc., but you're expanding into Nevada. Your corporate name is not likely to be on file in Nevada (who would name their Nevada corporation something that includes the word "Texas"?), so your name would be available.

But, you say, you don't want to do business in Nevada as Texas Trucking Services, Inc.—that's just silly and inaccurate. Don't worry—as soon as you file your Foreign Corporation, you can file a DBA for Nevada Trucking Services (some states even allow the Foreign Corporation filing and the DBA filing to be done simultaneously) so that you can do business in the new state under a logical name.

Here's another scenario. Your corporate name in your original state is Nick's Automotive Repair, Inc. You'd like to expand into a new state—but there's already a Nick's Automotive Repair, Inc. in that state! What now?

This is going to depend on your state. Many states provide an option right on the Foreign Corporation registration form to select a new name for use, in the event that your legal corporate name is unavailable. Other states require that you pay extra for that second name, taking on a mandatory DBA filing onto your Foreign Corporation application. In any case, you always have options as far as the name you wish to use in the new state—it just may take a second filing to get there.

In order to register a Foreign Corporation, most states will require a varying of one to two documents. Both are described below.

• Foreign Corporation Application

Remember your Articles of Incorporation, the documents you used to register your corporation in the first place? The Foreign Corporation paperwork is similar, though slightly more involved.

Every state has its own form you need to file—and, confusingly, that application goes by a different name depending on the state you're expanding into. It might be called the Statement and Designation, the Foreign Qualification Application, or any number of terms, but a quick peek at your state's Forms and Fees page will help you determine which form is the correct one.

While some states require more or less information than others, a typical Foreign Corporation application form will ask for the following pieces of information:

• The name of your corporation as laid out in the original Articles of Incorporation
• If that name is unavailable, the name under which you would like to do business in the new state
• Your domestic state
• The filing number and filing date in your domestic state
• Stock information (how many shares are authorized; the par value)
• The registered agent in your domestic state
• The registered agent in your new state, who must have a physical address in the new state
• The principle executive office address, which can typically be in either state
• The principle office address you'll be using in your new state, if applicable
• A list of corporate officers

Again, this list is a conglomeration of Foreign Corporation applications from several different states. Yours will be unique.

• Certificate of Good Standing

The Certificate of Good Standing is a document required of new Foreign Corporations in most states. This document will be generated by the Secretary of State's Business Services (or similar) division, and it will carry the state seal on it. The document may be a downloadable PDF, or it may be a physical document that must be mailed. Either way, there will be a security code on it that the new state can use to determine its authenticity.

The Certificate of Standing must typically show that your corporation is in Active status in its domestic state in order to be registered as a Foreign Corporation in a new state. If your Certificate of Good standing shows a status other than Active, such as Default, your corporation has failed to uphold the requirements (typically caused by a failure to file a required Annual Report or similar filing and easily fixed by paying the outstanding fees and any penalty fee that may be added).

Note: not all states require a Certificate of Good Standing. Some states require a certified copy of your original Articles of Incorporation, including any amendments; other states simply require a confirmation by a corporate officer that the domestic state holds the corporation in good standing, with no physical proof of this required.

There are a few ways to go about registering your Foreign Corporation, depending on your level of comfort and availability.

• Register your Foreign Corporation on your own.

If you choose to register your foreign corporation on your own—and there is absolutely no problem with doing so—just make sure that you're aware of and complying with any other potential legal issues; you'll likely need a variety of business licenses from your new state, county, and/or city, for instance, depending on your type of business.

• Hire a corporate attorney to register your Foreign Corporation for you.

While an excellent choice for people who aren't confident with the requirements, a corporate attorney will charge you legal fees not only for their legal advice, which is definitely worth your money, but also for passing along your information to a paralegal to draft and file, which may not be. It's up to you to decide.

• Hire a third-party filing service.

This is a great option for someone who's already consulted with a lawyer and knows what he or she needs, doesn't have the time or inclination to track down and file the required paperwork (and there's nothing wrong with that—you are busy running a business and planning for a second, after all), and doesn't want to spend the extra cash to have a lawyer do the actual filing. Many third-party filing services, such as Click and Inc, act as a kind of one-stop shop, providing not only Foreign Corporation filings but also other compliance services (such as business licenses) that might benefit your business.