Qualification To Do Business

  • Does your business conduct activities in, or have contact with, a state or states other than the state of formation? If so, the foreign state may require that your company qualify to transact business in that state. The question then becomes what constitutes doing business in a state. Unfortunately, there is not a definition that covers all situations. It depends upon the state. Oftentimes, the state’s statute will list activities that classify as doing business within the state. A lawyer will need to evaluate all of the company’s activities in, and contacts with, the particular state in making the determination.If a filing is needed, then typically it will consist of an application for authority, a certificate of existence or good standing in the home state and a filing fee.
  • This seems simple, right? So why does it matter? It matters because the consequences of failing to comply can be significant for a company. Oftentimes, a monetary penalty is imposed on the entity for each year it should have been qualified. Additionally, the foreign state will often prohibit the company from bringing a suit or proceeding in the state’s courts until it qualifies.