Foreign Entity Registration, What you should know in 2022

What’s foreign entity registration? Do I need one? Let’s talk about it.

Domestic Corporations and Foreign Entity Registrations:

Whether you’re a home-grown US entrepreneur or a foreign company looking to expand, it’s critical that you understand the difference between domestic entity registration and foreign entity registration.

After a business is first established as a domestic corporation in a home state, the business is then responsible for registering as a foreign entity in any other U.S. state where it does business.

What ‘Doing Business’ Means:

To know if you must register a corporation in a different state, you need to know the meaning of the term “doing business.”

U.S. businesses can operate in one or several states or they can operate in a foreign country. Corporations must register where they are doing business, and that might mean registering as a domestic or foreign business, or both. What if you do business in several states or in a state and a foreign country? It gets confusing, so let’s sort it out.

In general, you are doing business in a state different from where you are incorporated in if you have one or more of the below listed similar scenario

  • You own real estate or property in a State or Country different from the original State of incorporation

  • You have a business bank account in a State or Foreign Country different than the State originally incorporated in

  • You have a home office, manufacturing or distribution facility, or retail store in a different State or Country than the State originally incorporated in

  • You operate a freight transportation, trucking, or hauling business outside of the State or Country originally incorporated in

  • You transact any type of business in a different State or Foreign Country than the state originally incorporated in

What is a Foreign Entity or Foreign Entity qualification?

A foreign business entity is an entity formed in a jurisdiction other than the state in which your corporation was originally formed. The foreign corporation is registered with the state or country where you want to do business. It is also known as an Out-of-State/Country Entity.

For example, if your company is incorporated in the state of California, but now you want to expand your business in the state of New York, then you would have to file as a foreign entity within the state of New York. In other words – you must apply for authority to conduct business in New York.

Who should apply for a Foreign Entity?

All business entities who want to conduct their business in a state other than the state they were formed, must obtain authorization to do so from the State or Country. This process is commonly referred to as a “foreign & domestic certification” or “register foreign corporation”. Doing so will establish legal standing to start your business in that state or country.

For example, this would apply to renting property outside the State you are incorporated in or transporting goods via a commercial vehicle outside the state you are incorporated in.

Why should I apply for a Foreign Entity certification?

If you are going to start business transactions in a state other than the state in which you are currently doing business, then you are required to file for foreign & domestic certification with the hosting state (in which you want to conduct business). This act will help you and the business to enjoy all benefits that a domestic corporation may have in that hosting state.

Is there any penalty to transact business without acquiring a Foreign & Domestic Certification?

  • A corporation cannot maintain an action, suit, or proceeding in a court until it registers.

  • A corporate veil by design provides asset protection, as well as officer, director, shareholder indemnification protections for your business, are not enforceable unless properly registered

  • The State Attorney General can enjoin the corporation from transacting business in the state

  • The corporation is subject to a civil penalty equal to all fees and taxes that would have been imposed if the entity had registered when first required; and

  • If the entity has transacted business in the state for more than ninety (90) days, the state may condition the filing of the registration on the payment of a late filing fee equal to the registration fee for each year or part of a year of delinquency

  • Federal & State Department of Revenue tax regulations requires your company to be properly registered to claim itemized business expenses outside your state of incorporation

Each company’s situation is unique. Omni Resources will prepare Foreign & Domestic Certification documents and register your business with the appropriate agencies in any state or country so your corporation can operate and conduct business within that state or country and maintain full compliance.

Questions?

(888) 882-8483

clients@omniresources.net

https://www.omniresources.net

Editor’s note: Nothing in this blog post should be construed as advice of any kind. Any legal, financial or tax-related content is provided for informational purposes only and is not a substitute for obtaining advice from a qualified legal or accounting professional.

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