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Foreign Qualifications

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Qualification Service
When you foreign qualify to do business in a state this means that you are taking the legal steps to notify a State other than the home State of Incorporation, that you are there operating in that State and that you would like to maintain a legal entity status there.

Why is it important to Foreign Qualify?

When you form a legal business entity it is generally with the intention of separating yourself from the business of which you operate and/or have financial interest in. When you foreign qualify you are asking a State for permission to conduct business within their borders, but more importantly you are requesting that that State recognize the legal business entity separate from the individuals who are operating and/or have financial interest in it. When a business entity be it a Corporation, Limited Liability Company, Partnership or other entity type operates within a State that has not legally approved it to operate within their borders then if for any reason legal matters should arise in that State, that State can make the decision to not recognize the legal entity and instead hold the operating person or persons along with the persons who hold financial interest personally liable for those legal proceedings as if it was a Sole Proprietorship.

Take the test: Do you need to Foreign Qualify your business?

Ask the below 5 questions, if the answer is “yes” to any of the below questions, you need to file a foreign qualification:

1. Will the legal entity hire and maintain any W2 Employees?
2. Will the legal entity be required to hold special licensing? (i.e. Mortgage, Real Estate, or Contractors License)
3. Will the legal entity hold any real property? (i.e. rental property, personal property, or commercial property)
4. Will the legal entity have a brick and mortar location? (i.e. office building or will a sign be hung somewhere and display the company name)
5. Will the legal entity be shipping any product from with in the State?

If the answer to any of the above is "yes", don’t try to manipulate the question and answer to "no". There is a high risk involved in doing so. Many legal entities make the mistake of trying to find a way out of having to file to do business in states that have high taxes for the purpose of evading taxes. If you do this, you put your employees, business and reputation in that state at risk. You become a constant target for the state to make sure that the entity is always in compliance. The cost and headaches involved in dealing with the state are far less if the entity is honest and follows the correct steps to being in legal compliance than to have to do so because it was caught doing business without the legal authority.

What is involved in Foreign Qualifying your business?

Each state varies in its request of documents. Most commonly states will have a specific form they will request be completed for whichever entity type is qualifying and they will request a copy of the original formation paperwork along with a certificate of good standing. Foreign qualifying can be time consuming and a massive headache if you are not familiar with what each state’s requirements are (and they are ALL different). This is why InCorp has created a quick and easy solution, and that’s to let us, the experts, do it for you.

Click if you have any questions about Foreign Qualification.

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