If you’re considering expanding your business into another state, then you’re ready to start the foreign qualification process. That means you’ll need to apply for and get a Certificate of Authority.
If you’re not familiar with a Certificate of Authority, don’t worry. In this guide, we’ll cover all the essentials, including what the certificate is, when you need one, and how to get one.
A Certificate of Authority is an essential tool for businesses that want to qualify as a foreign limited liability company or foreign corporation — a process called foreign qualification. Put simply, a Certificate of Authority is another state’s way of giving you permission to transact business in their jurisdiction. Some states call it another name, such as Application to Transact Business, Application for Registration, or another name. No matter what the name of the Certificate is, the fact remains: if you’re going to conduct business in another state, you’ll need a Certificate of Authority.
You need to obtain a Certificate of Authority from another state when you are transacting business there. Unfortunately, there isn’t a cut-and-dry definition for what constitutes “conducting business” in a given state. Often, you qualify as a foreign entity that’s conducting business when you have a physical location in that state, you have employees there, or your business operations there are regular and consistent.
Every state has slightly different standards for what qualifies as doing business. If you’re not sure if you’re conducting business in a given state, we highly recommend consulting with a local attorney for guidance.
Failing to get a Certificate of Authority when you’re required to get one can have some consequences. Again, these consequences can vary by state. But generally, you can expect to be charged penalty fees if the state realizes you’re conducting business activities without registration. Your brand reputation could suffer, too.
Additionally, you can’t initiate a lawsuit in that state without a Certificate of Authority. For example, you wouldn’t be able to sue a contractor for damages to your building in the new state. While not all businesses will need the rights to start legal proceedings, it’s a consequence worth mentioning.
Ready to get a Certificate of Authority for your business? The exact process you need to follow varies from state to state, but there are a couple of steps, and they’re pretty similar. Let’s cover those basic steps so your application process can flow as smoothly as possible.
The first part of foreign qualification is to get a Certificate of Good Standing from your home state. A Certificate of Good Standing is basically a stamp of approval from the state where you’re considered a domestic business. The certificate certifies that you’ve upheld all your responsibilities, such as filing annual reports, paying state taxes, keeping a business license, and so on. Typically, states ask to see an up-to-date Certificate of Good Standing before they’ll issue a foreign qualification.
You can request a Certificate of Good Standing — sometimes called a Certificate of Status or similar title in some states — pretty easily. In some states, all you have to do is log in to your online portal, click “request Certificate of Good Standing,” and wait for it to arrive. Other states have a paper form. And if you’re not currently in good standing, you’ll need to correct whatever is causing you to be out of good standing first; then you can request a certificate.
If you have a recent one, you may not need a new Certificate of Good Standing; since the certificate has other purposes, you may already have one on hand. If not, you can request a new one at any time.
Every state protects the names of registered businesses in its jurisdiction. So if you expand into another state, your business name will need to be distinct from the business names in the new state. While it’s uncommon, there is a chance that your name will match — or be too similar to — the name of an existing business in the state you’re expanding into.
If that’s the case, don’t despair; you can still expand into that state. You’ll just need to get a DBA name, or “doing business as” name. Sometimes called a trade name, assumed name, or fictitious name, a DBA registration lets you operate under a different name legally.
Often, your legal name will still be available and you won’t need a DBA, but it’s essential to check.
Remember when you had to appoint a registered agent when setting up your business? You get to repeat that step for the state you’re expanding into. Whomever you pick, your new registered agent must have a physical address in the new state where they’re present during regular business hours. They must also meet any other legal criteria for registered agents in that state.
If you hired a registered agent service like ours, you should check if they serve the state you’re joining. If so, you may need to pay them extra fees. If not, you’ll need to hire a second agent.
Once you have your registered agent, a viable business name, and proof of your good standing, you can start the application process. First, you’ll have to locate the form for your new state; often it’s called the Application for Certificate of Authority, but some states use titles like the “Certificate of Authority Application,” “Certificate of Existence,” or another similar phrase.
After you’ve located the form, it’s time to fill it out. Every state’s form is a little different. But generally, you’ll need to provide your name, the registered agent for service of process you’re appointing, your address in the new state, your business purpose, your contact information, and so on. States usually require a small filing fee to accompany this business registration.
After your Certificate of Authority form is approved, you’ll be granted business authority in the new state. Some states will actually issue you a physical certificate. Processing times vary, ranging from a few business days to several weeks.
In some states, you might qualify for a temporary certificate instead of a regular Certificate of Authority. Typically, these certificates apply if you only have taxable sales of tangible property in that state for a limited period of time.
Be sure to check with the state in question to see if they offer these types of certificates to business entities.
One of the trickiest aspects of running a foreign LLC or foreign corporation is staying on top of compliance requirements for that new state. For example, your new state might require you to maintain and renew a business license. And the annual report process will probably differ from your home state. You’ll need to register with the state tax department, collect sales taxes, and so on.
To keep your foreign qualification, it’s essential that you learn your state’s compliance requirements and uphold them as carefully as possible.
Starting and expanding a business can feel overwhelming, but it doesn’t have to be a solo effort. Here at ZenBusiness, we help small business owners navigate the red tape side of business so they can focus on what matters: their goals. While we don’t have a foreign qualification service, we can help in other ways. Whether you need help starting a brand-new LLC or corporation, getting a Certificate of Good Standing, or a new registered agent, we’ve got you covered.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
A Certificate of Authority is like a permission slip granted to a foreign LLC or corporation for the right to conduct business in that state.
The biggest benefit to a Certificate of Authority is that it gives you the legal right to transact business in the state that issued it. It also protects you from incurring unknown fees and penalties.
To get a Certificate of Authority, you’ll need to file an Application for Certificate of Authority (or similar form). As part of the application, you’ll be asked to show a Certificate of Good Standing, verify your business name, and appoint a local registered agent. Once your application is approved, the state will issue you a Certificate of Authority.
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