Foreign vs Domestic Corporations

The term foreign qualification can often be confusing to business owners. The first thing most of us think of when we hear the term “foreign” is something outside the United States; however, in the world of US corporations and limited liability companies (LLCs), the word foreign has a different meaning.
 
Foreign qualifying a company means that you are registering it to transact business in a state other than the state of formation. Corporations and LLCs are considered domestic only in their state of formation. For example, if you formed your LLC in Delaware, it is only domestic in the state of Delaware. If your LLC is transacting business outside the state of Delaware, it would be considered a foreign LLC in those other states.
 
When you foreign qualify a business, you register for a certificate of authority in the state or states where your company will be transacting business, and pay the necessary state fees. By doing this, the state knows that a foreign corporation or LLC is conducting business within its borders.
 
If you are currently evaluating whether to form your business as a corporation or LLC in a state other than one where you are transacting business, and you may need to foreign qualify in that state, keep in mind that your business will be subject to ongoing reporting requirements, fees and taxes in both your state of formation and state of qualification. If your business is expanding into new states and you need to qualify it as part of this growth, these initial and ongoing fees should be considered a necessary part of doing business.