What is Foreign Qualification?
Foreign Qualification is the process of registering a business in a state other than the state it was originally formed in. An entity may do this when they conduct business in multiple states or because they, for tax reasons, have formed their company in a state other than their home state.
When You Need Foreign Qualification
The term foreign often confuses people because it is generally used when referencing something out of the country. In this case, foreign refers to any location that is not the state your entity was originally formed in.
If your corporation was formed in New York, for instance, you would need to file for foreign qualification to do business in Delaware.
What constitutes "doing business" varies. Having a physical location in the state requires foreign qualification in nearly all states, however other situations that require foreign qualification may include:
- Having an employee based in the state
- Making online sales to customers in the state
- Owning property in the state
Each state has a different definition of what constitutes doing business so it's important to confirm whether or not foreign qualification is needed. The best way to do this is to reference the corporate laws or code for the state or to contact your attorney.
Foreign Qualification Outside of Delaware
Delaware registered businesses who wish to do business outside of the state may be required to file foreign qualification in the state or country they wish to do business in. This is a common set up and we see it frequently, as there are many advantages to forming your business in Delaware.
Most states require that a recent certificate of good standing be submitted when applying for foreign qualification.
If your entity was formed in Delaware and you need a good standing, you can order a certificate of good standing online here. We can provide you with a certificate of good standing even if we are not your registered agent. Turnaround time is generally same business day, within two hours.
Our partnership with URA means we can seamlessly assist you with your foreign qualification in another state if you're interested.
Foreign Qualification in Delaware
If your business was formed in another state or country and you’d like to do business in Delaware, you will need to submit a Qualification of Foreign Corporation form along with a Certificate of Good Standing from the state or country where the business is registered. The certificate of good standing must be less than six months old.
The Incorporators can file your foreign qualification on your behalf. If your entity is based in another state and you'd like us to file your qualification of foreign corporation documents for you, contact us here.
Ongoing Foreign Qualification Requirements
Every state has different laws regarding the ongoing requirements for foreign qualification. Most states require you to maintain a registered agent in the state and many require a yearly tax or fee, annual report, or both.
Businesses who receive foreign qualification in the state of Delaware must file an annual report with the state by June 30th of each year. The fee to file an annual report is $125.
Example of Foreign Qualification
A corporation called “Flower Shop Corp.” is formed in Pennsylvania. Flower Shop Corp. is doing well and decides to expand their business into Delaware.
Before they begin doing business in Delaware, they must submit a Qualification of Foreign Corporation along with a recent certificate of good standing from Pennsylvania.
They are required to appoint a registered agent and chose The Incorporators to be their Delaware registered agent.
Each year Flower Shop Corp. submits an annual report and the corresponding $125 fee to the state of Delaware before June 30th. They also pay a $99 registered agent fee to The Incorporators each year on the anniversary of their filing.
If you have any questions about foreign qualification, feel free to give us a call at 800-223-3928 or contact us here.