Doing Business in Another State – Foreign Entity Registration
What is foreign entity registration on a state level?
A “foreign” entity does not always mean that a company is incorporated outside the US. At the state level, a foreign entity may refer to a company that was incorporated in a different state.
If your corporation or LLC is incorporated in one state but wants to do business in another state, you will need to register your company as a foreign entity in the state you wish to do business in. This is known as foreign registration.
Example of a foreign entity registration
If you’re incorporated in North Carolina and want to do business in California, you must register your company as a foreign entity in California through the Secretary of State website.
If your company is incorporated in North Carolina, it must register as a foreign entity in every state where you do business.
When you are doing a foreign filing, the exact process may vary from state to state, but for most, you must have a registered agent representing your company who lives in the state where you are planning on doing business.
Where you should incorporate
However, if you are planning on starting a company, it is often better to incorporate your company in your home state instead of Delaware.
Many people believe that incorporating your company in Delaware gives you huge benefits even if you don’t live or do business in Delaware. But in reality, if your company is likely to remain smaller and privately-held, the benefits of well-developed Delaware corporate law and precedent begin to give way to the higher costs and obstacles associated with incorporation in Delaware.
So, if you are going to incorporate your business, consider doing it in the state where you currently reside instead of going to Delaware. If you are planning on doing business in multiple states, you must file as a foreign entity in each state where you do business.
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For more information about incorporation in Delaware, click here.