When it comes to incorporating a startup company, people from all over the world decide to form their new LLC or corporation in the state of Delaware. Delaware has long been recognized for having the strongest corporation law structure.
A Delaware company can operate all over the world; however, if you would like to operate in your home state (or any state other than Delaware), you must file for Foreign Qualification after forming a Delaware company.
Foreign Qualification is the manner in which your home state gives you the permission to operate there using a Delaware company. This allows your company to operate under Delaware’s corporate law structure.
If your business will have a physical presence by operating, hiring employees, banking or even holding an asset in a state other than its State of Incorporation, business owners typically qualify their business to operate in that state. For example, if you form a Delaware LLC and want it to operate in the state of Tennessee, the Foreign Qualification process will be necessary.
Tennessee, like many other states, has an application process, a state fee and also requires additional documentation from Delaware in order to register your company in Tennessee as a foreign entity.
This additonal document is called a Certificate of Good Standing. The Certificate of Good Standing from Delaware is required by Tennessee to be less than 2 months old.
It is proof to Tennessee that your company is in good standing in the state of Delaware, meaning that the company is in compliance and is current on all Franchise Tax.
Please keep in mind that this step is required even if your company is new. The document that will be returned from Tennessee as a result of the Foreign Qualification process is called a Certificate of Authority.
Once you are registered as a foreign entity in Tennessee, you will be responsible for filing an annual report in Tennessee. The annual report notices are sent to your business address. Please keep in mind that in addition to the Tennessee requirements, Delaware companies operating in Tennessee are still required to maintain a Delaware Registered Agent and pay Delaware Franchise Tax in order to remain in Good Standing.
If you have questions about registering your Delaware LLC or Corporation as a foreign entity to operate in Tennessee, or are in need of Tennessee Registered Agent Services, please contact us at 1-800-345-2677, Ext. 6130 or email us.
THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND HARVARD BUSINESS SERVICES, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF DELAWARE’S CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.