What Is Foreign Qualification?

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what is foreign qualificationIncorporating your company in Delaware is an important first step in the governance, the protection and, ultimately, the longevity of your company. 

Delaware has the strongest corporate law structure and the largest body of case law in America, and is recognized as possessing the most business-friendly environment in the country. This why over 64% of Fortune 500 companies and almost all new IPOs call the state of Delaware home.

Foreign Qualification is the process of registering your Delaware LLC or corporation, which is considered domestic to the state of Delaware and foreign to all other states, as a foreign entity in your company's home state.

If you plan to operate the business, open a bank account, hire employees or hold an asset in any state other than the state of incorporation, you may be required to file for Foreign Qualification. If you fail to do so, you may be jeopardizing your company. 

Other states understand that Delaware’s corporate laws provide greater asset protection and more privacy and, because of this, many people choose to incorporate their companies in Delaware. A common misconception is that by incorporating in Delaware, people can avoid taxation and other financial obligations in their company's home state. 

Generally, this is not true. In most cases, if a company generates revenue of any kind, there will be an inherent tax liability in their company's home state. States require that businesses operating within their jurisdictions are licensed, registered and pay taxes.

Filing for Foreign Qualification for your Delaware LLC or corporation in the states in which it operates will render it both legal and taxable.

Another common misconception is that if a company operates 100% online and there is no brick and mortar operation, Foreign Qualification isn't necessary. Again, in most cases, this is untrue. It may depend on where the servers are located and where the business banking is done (the latter is considered one of the primary activities of a company’s operations).

You’ve taken a positive first step by incorporating your company in Delaware, but make sure you meet all compliance obligations in your company's home state.

As Delaware business formation specialists, Harvard Business Services, Inc. is familiar with the Foreign Qualification process—the required documents, application, fees and time frames, which vary—for every state. 

We can file for Foreign Qualification for your corporation or LLC. If you'd like to learn more about the process, please visit our Foreign Qualification informational page.

If you have any questions regarding the Foreign Qualification of your Delaware LLC or corporation, please contact us via live chat or phone at 800-345-2677). 

More By Andrew Millman

There are 6 comments left for What Is Foreign Qualification?

Kevin said: Saturday, December 3, 2016

I would like to find out how much it costs to register a Delaware business in New York.

HBS Staff replied: Monday, December 5, 2016

Kevin, you can read more about NY Foreign Qualification here: https://www.delawareinc.com/blog/new-york-foreign-qualification/.

You can also call us at 1-800-354-2677 or LiveChat with us and we can walk you through the process, including prices.

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