Sign up for email updates from SBAReceive helpful business tips and upcoming events in your area.


Privacy Policy
Log in to SBA.gov:
Enter your SBA.gov username.
Enter the password that accompanies your username.

Community Header Banner

Doing Business in Another State? It Might Be Time to Register

by b2beditor, Performer

  • Created: October 15, 2009, 11:59 am
Share:
3 comments

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

borders.

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.

Tags: Guest Blogs, The Industry Word

Comments

shempler | Performer | 2/4/2010 - 1:44 pm

PLEASE HELP: I have read countless posts on this site and others on this topic, we have also consulted CPA's and tax attorneys and we are still so confused by something that surely is not rocket science :) My partner and I, both in different states, CA and CT, are starting a service business, both working from home, online and by phone, have no office, sign designating our office or business on the premises, no employees, no product, (we are headhunters-recruiters) and thus no really liability issues given our industry. We need an EIN number so our clients can pay our invoices for our service. I understand the simplest thing would be to each register as sole proprietors in our individual states but then we need two EIN numbers and that gets confusing for the clients given we are working off one contract and do not want to make things complicated for our clients. All other options an LLC, Partnership and or just 1099 one of us seem to bring about extra tax burdens to either both of us or one of us. Note: I am also aware that CA is probably the worst state to do anything in, this posing part of our dilemma. Note: the person in CA may also be moving to WA state in the next 6 months, which is a much more business friendly state but for now we need to work with what is definite. I can't believe this is so difficult is there someone out there that can tell us the best way to go about this?? Please someone help two single Mom's trying to live the American dream......

sammylovell | Window Shopper | 8/2/2010 - 2:38 pm

I understand what you mean completely. I am in the same dilemna. My siblings and I are in GA & TX respectively. We are looking to get answers on if we have to foreign LLC in either state, to do business from home, while having at least one state be the 'HUb' for the business. I do realize it has to be registered somewhere, but multiple states? Finding the answers you need is like a needle in a haystack. All answers point towards consulting a lawyer, but if you're trying to get something up and running with limited cost, it seems impossible to do so. I would like to know that same answers you seek, so If I find out anything in the meanwhile, I will let you know.

calitairsein | Window Shopper | 10/11/2010 - 11:02 am

Hello, it is really cool blog and nice information about EIN. I do agree that This is the best defense against identity theft. I found some information from this irsein(dot)org slash blog. thanks so much ---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.