Doing Business in Another State? It Might Be Time to Register
by b2beditor, Performer
- Created: October 15, 2009, 11:59 am
When a business entity wants to operate in another state, it
generally must obtain a certificate of authority to do business from that state’s Secretary of State. A certificate of
authority usually costs about $150.
Its important to determine if registering to do business
within a jurisdiction is necessary. It's not
a decision to make lightly because it will likely trigger inquiries by the
states tax agency as to whether the corporation should be subject to tax there.
On the other hand, doing business in a state without
registering can result in penalties or corrective action by the jurisdiction.
Many states bar unregistered business entities from maintaining a lawsuit in
their courts until the business entity registers to do business and pays all
outstanding taxes. In New York, for example, the attorney general has the
authority to restrain an unregistered business entity from transacting business
within its borders.
What constitutes doing business in a state? Unfortunately,
the answer varies from state to state and is sometimes unclear. Most states
maintain a list of safe harbor activities that do NOT constitute doing
business. A type of activity that is often included on these lists is
maintaining a bank account within a state's
Many state statutes don't
specifically define what they consider to be doing business in their
jurisdiction. It usually depends on the facts of each case and is best answered
by reviewing the jurisdiction’s case
law. Opening a store in a state would constitute doing business in any
jurisdiction. But its harder to find definitive answers to questions such as
whether hiring an employee who telecommutes from a state would be considered to
be transacting business there.
Because of the unclear nature of these determinations, its
usually a good idea to consult a lawyer who is familiar with this area.
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