Foreign Qualification

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A corporation doing business in one state when incorporated in another is considered a foreign corporation and must qualify as a foreign corporation to legally do business in that state. For example, a business incorporated in Nevada that wants to do business in California would be considered a foreign corporation in California, and as a result, the Nevada corporation must qualify (or register, depending on the state) as a foreign corporation to do business in California and then becomes responsible for the California state taxes including the Franchise Tax.

“Doing Business” can be nothing more than having a bank account in a state other than the home state.

States generally have a similar filing process to qualify (or register) as a foreign corporation, but some states may require a bit more (please refer to the specific Secretary of State to get the detailed requirements for that state). However, here are the general requirements that almost all states will demand. The Secretary of State will require a foreign corporation to fill out a form, commonly called the Foreign Corporation Certificate or Qualification to do Business.  This form will ask for: the name of the corporation, the state of incorporation, the address of the principal office in the state of incorporation, the address of the principal office in the foreign state, and the name and address of the registered agent for that state. Every state will require a foreign corporation to provide the name and address of a registered agent in order to give the state a means to communicate with the foreign corporation. The registered agent (an individual or corporation) must generally reside within the state and provide a physical address (no P.O. Box). The form must be signed and dated by a corporate officer. Also note, there will be a filing fee for registering as a foreign corporation.

Many states also require a Certificate of Good Standing (or “Certificate of Existence” depending on the state) to be filed by the foreign corporation along with the form described above. This Certificate is used as evidence that the foreign corporation exists and is authorized to conduct business in that foreign state / country. This Certificate is issued by a state official from the state of incorporation.

Some states may require the foreign corporation to list its assets and liabilities as well as the assets and liabilities within the state it wishes to qualify to do business in. Also, some state may have stricter requirements regarding the registered agent.

Always consult an accountant or attorney regarding the tax implications of conducting business in another state.

We are always available to assist you with all your corporate needs.

State Updates

California-  Fraudulent letters are being sent to California businesses instructing them to remit fees for a “Certificate of Status”. The letters are made to look as though it is a government notice, when it is not. Only the Secretary of State’s office issues certificates of status.  Read more  

Effective May 2014, the Secretary of State’s office no longer issues individual Certificates of Filing. They may be requested but will now include all filed documents, or you may request certified copies of individual documents.

Connecticut- A new bill was proposed to help clean up the public records by allowing the state to administratively dissolve entities that have not filed Annual Reports. Those entities may reactivate by paying reinstatement fees.

Maryland- Effective July 1, 2014 Limited Liability Companies may claim an exemption from recordation and transfer taxes for the transfer of real property as part of a reorganization under IRC Section 368 (a). Previously this was only available to Corporations.  Read more 

Mississippi- Effective July 1, 2014 procedures for name reservations were modified to make them the same for all entity types. They may also be renewed thirty days before they expires.  Read more 

Virginia- Effective July 1, 2014the state Corporation Commission may refuse to file documents submitted for filing if they are not prepared or submitted by an authorized representative of the entity.  Read more

Washington- Effective June 12, 2014 Corporations, Limited Liability Companies and Limited Partnerships may convert between entity types. Also Corporations and Limited formed in other states may now convert to Washington.  Read more

Changing Your Company Name

Before you change the name of your entity, there are some things to keep in mind. Not only can it be costly, but it can also disrupt your business activity. For example:

How long has your business been established?

The longer a business has been established, the more disruptive a name change can be. For example, former and existing customers will have to be notified and update their records. Employee email addresses would need to be changed. Printed materials, bank accounts, web sites, etc. would also need to be modified.

Is the name Trademarked?

Using a name that is trademarked by someone else can cost you an enormous amount in legal fees. It’s always a good idea to do an internet search to look for other companies that may have the name trademarked. The U.S. Patent and Trademark office has a helpful tool for searches. https://www.uspto.gov/trademarks/

Is the domain name available?

You’ll want to make sure the domain isn’t already taken as well as search for variations.  For example, it may be available with “.com” at the end, but there may be a company with the same domain but “.net”. This can cause confusion for people searching out your company on the internet.

Is there negative publicity for a company that has the same or very similar name?

Even if a name isn’t trademarked, you’ll want to look for complaints. You don’t want potential customers to think these are about your company.

If you do decide to go through with a name change, here are some additional steps that should be tended to:

  • Have a formal meeting to discuss, vote and approve the name change.
  • Prepare Minutes and Resolutions
  • File an Amendment with the Secretary of State (home state and foreign where registered)
  • Notify your bank
  • Notify the IRS https://www.irs.gov/Individuals/Business-Name-Change
  • Notify City, State and County revenue offices
  • Notify clients and vendors
  • Revise licenses and permits
  • File new “DBA”, if/when necessary
  • Update business documents (loan, lease, other contracts, etc.)
  • Obtain a replacement Record Book with new stock certificates & corporate seal
  • Reissue stock certificates under new business name

Building Business Credit- 6 Reasons Why It’s Important

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1. Adds to the separation of you from your business. You’re not it and it’s not you.
2. It helps to limit your personal liability. The more your business credit increases, the better chance it has of obtaining financing without involving your personal credit.
3. It helps to preserve your cash with added flexibility for credit lines, extended payment terms, etc.
4. It helps to safeguard your individual FICO® scores and individual credit reports.
5. It can help maximize additional funding opportunities for your business both in types and credit capacity many times that of your personal credit.
6. Good business credit is a valuable asset for attracting potential investors and partners.

 

Documenting Your Business Activities

As stated in previous posts Corporate Record Keeping is essential when it comes to protecting your assets and tax benefits. Anything that is of major business consequence should be documented in your records. You need to show evidence that it was approved by the company.

Below are is a partial list of examples of business activities to document:

  • Amendments to the Articles
  • Annual Meetings of Shareholders/ Members
  • Annual Meetings of Directors/ Managers
  • Special Meetings of Shareholders, Directors/ Members
  • Authorization for Voting Proxy
  • Opening of bank account
  • Adding or changing bank signatories
  • Authorization to change or appoint company accountant
  • Authorization to appoint legal counsel
  • Authorization for payment of business travel
  • Changes to Bylaws or Operating Agreement
  • Changes in Stock/ Membership Certificates to correct errors or omissions
  • Changes in Officers/ Management (new appointments, resignations, dismissals)
  • Reimbursement for child care expenses
  • Independent contractor service (1099s for outside services)
  • Authorization for credit card
  • Authorization to establish line of credit for the company
  • Authorization for Foreign Qualification
  • Reimbursement for Life Insurance
  • Medical and Dental Reimbursement Plans
  • Mergers and acquisitions
  • Promissory Notes
  • Retirement Accounts
  • Purchase of Key-Man Policy
  • Real Estate leases or purchases
  • Setting salaries for Officers/ Managers
  • Authorization to pay for vehicle expenses (purchases, leases, maintenance, insurance, gasoline)
  • Dissolution of company

We do offer Corporate Record Keeping Assistance. For more information and sample forms, visit https://americancorpenterprises.com/what-we-offer/services/corporate-record-keeping/

 

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