Answers|Dictionary

Do I have to register my company in every state where it does business?

Multi-stateComplianceFormation

Yes. Forming an LLC or corporation in one state gives it the right to exist, not the right to operate everywhere. Once the company is doing business in a second state, that state expects it to register there, a step called foreign qualification, and to keep a registered agent and file reports there for as long as it stays. Foreign here means from another state, not another country. A Delaware corporation with its team in Texas is a foreign corporation in Texas.

What doing business means

Each state defines it in its own statute, and most define it by listing what does not count rather than what does. The things that reliably trigger it: an office, a shop or a warehouse in the state, employees based there, and owning or leasing real property there. The things that reliably do not: selling to customers in the state from somewhere else, holding a bank account there, one-off transactions, and being a party to a lawsuit there. A remote employee's home is the case that catches software companies: in many states one employee working from home there is treated as doing business, and the safe course is to assume it is.

What happens if you do not

The consequence common to every state is that the company cannot bring a lawsuit in that state's courts until it registers and pays what it should have paid, which tends to be discovered at the worst moment, when a customer there has not paid. Some states add penalties. California's statute sets a penalty of twenty dollars for every day a foreign corporation transacts intrastate business without a certificate, plus a further penalty and back taxes before it can sue. New York bars an unauthorized foreign corporation from maintaining any action in its courts until it registers and settles all fees, taxes, penalties and interest, though its contracts stay valid. Back taxes and interest come with late registration in most states.

When you form through Arabella, the questionnaire asks where the company will have people, an office or property, and Arabella's team files the qualification in each of those states for you.

Written by the lawyers who built Arabella. This is legal information, not legal advice for your situation, and reading it does not make us your lawyers. For a real dispute or a high-stakes decision, talk to a licensed attorney. More questions.