Get A Foreign Qualification

A company is considered “domestic” only in the state where it was originally formed. For example, if you formed your LLC in Delaware, it is a domestic company in Delaware.

That same company is considered “foreign” in every other state.

So, if your Delaware LLC expands to also do business in Florida, your company is considered foreign by the state of Florida. This is why you must “foreign qualify”—to register your domestic company as a foreign company in a new state.

Yes, in most cases, you must foreign qualify your company before you can get business licenses in other states.

Think of it as a two-step process. The foreign qualification is Step 1. This registers your company at the state level, and once it’s approved, you receive a Certificate of Authority.

Step 2 is getting your local licenses. When you apply for a business license from a city or county, or a professional license for your industry, they will almost always ask for a copy of your Certificate of Authority. They need proof that you are in good standing with the state before they will grant you a license to operate.

While not every out-of-state activity requires it, choosing not to foreign qualify when you should is a major risk for your business. The consequences can be serious and costly.

Potential risks of not qualifying include:

• State Fines: States can charge significant fines, which can sometimes be retroactive for every year you were not in compliance.
• Owing Back Taxes: You may be held responsible for all the business taxes you should have paid during your time operating in the state, plus interest and penalties.
• Losing Access to Courts: Most states will not allow your company to file a lawsuit until you are properly registered.
• Loss of Liability Protection: In some cases, you could even risk losing the personal liability protection your LLC or corporation provides, putting your personal assets on the line.

For these reasons, foreign qualification is more than just a formality—it’s a necessary step to protect your business and ensure you can operate smoothly and safely in a new state.

The cost to foreign qualify can vary greatly between states. All states will charge a filing fee to accept and process the foreign qualification document. This can be anywhere from $70 to $750 in a state like Texas.