When you form an LLC or a Corporation, it is registered in a specific state, known as its "domestic" state. If you plan to expand your business operations into other states, you will likely need to register your company in those states as well. This process is called foreign qualification.
Failing to foreign qualify when required can lead to serious penalties, including fines and back taxes. Dappr offers a service to handle the entire foreign qualification process for you, ensuring you can expand your business compliantly.
What is foreign qualification and when is it required?
Foreign qualification is the process of registering your business to operate in any state other than the one where it was originally formed. A state where you are not incorporated but are conducting business is considered a "foreign" state in this context.
The key question is what constitutes "conducting business." While the specific rules vary by state, you are generally required to foreign qualify if you have a significant and sustained business presence in a state. This is typically triggered by activities such as:
Having a physical presence: This includes opening an office, warehouse, retail store, or other physical location in the state.
Having employees: If you hire employees who live and work in that state, you will almost always need to foreign qualify.
Regularly conducting in-person business: This could include regularly meeting with clients or providing on-site services within the state.
Owning property: Owning real estate in the state that is used for business purposes.
Simply selling to customers in another state via e-commerce, without any other presence, does not always trigger the need to foreign qualify, but it may trigger sales tax nexus obligations.
Why is foreign qualification important?
If you are required to foreign qualify in a state and fail to do so, you could face serious consequences, including:
Financial penalties and fines from the state.
Liability for back taxes, including interest.
The inability to file a lawsuit or enforce contracts in that state's courts, which can be a significant business risk.
How to order foreign qualification service
Dappr can handle the entire foreign qualification process for you, from preparing the necessary paperwork to filing it with the state.
From the main menu, navigate to Business Records.
Select Legal and filing services from the top menu.
Click on the Filing services tab in the sub-menu.
Find the Foreign Qualification service in the list and click the Order button.
You will be guided through a short form to provide the necessary information about the state you wish to register in and your business activities there.
Complete the form and proceed to payment to finalize your order.
Once your order is placed, Dappr will prepare and submit the required documents to the state. You can track the progress of your filing from your main Dappr dashboard and in the "Orders" tab of the Legal and filing services page.
Dappr is not a law firm and this content is not legal advice. The requirements for foreign qualification are complex and vary by state. We recommend consulting with a legal professional to determine your specific obligations.