Whether your business is just starting out, or your business is considering expanding, if your organization is planning to complete transactions outside of your home state, there are some necessary requirements in order to meet compliance rules. Failing to follow the proper procedure for your corporation or limited liability company, also known as an LLC, can have negative outcomes that may affect the future of your organization.
Each state in which your company conducts business may have different procedures and qualification requirements that need to be addressed. A firm that conducts trade outside of its home state is referred to as a foreign entity. Doing business as a foreign company in another state may also have tax implications that could require you to file additional returns out of state.
Examples of Out-of-State Trade
Knowing if you need to qualify for trade in another state depends on the understanding of two important terms, intrastate and interstate. Intrastate transactions occur when a company conducts business within a state’s borders. That may include manufacturing a product inside of a border and then selling it to someone who lives in the state. It may also include a business location that is situated within a state and provides services for residents of the same state. In order to conduct intrastate business, you must register your company within that state. In some cases, your business can avoid this requirement if your operations include the following activities:
Interstate business, however, does not require you to qualify for registration inside of the state. This type of commerce occurs when your company crosses other states’ lines in order to complete transactions. If your business is located in one state, and your customers are all over the country, you do not need to worry about qualifying for out-of-state business credentials in order to sell to people located outside of your home base.
As a corporation or an LLC, it’s important to meet the required qualifications in each state in which you conduct intrastate trade. Just as you filed and registered in your home state, you must now complete documentation that allows you to conduct business in other states. States may have different procedures, so be sure to research the necessities for the states that you are working in. In most cases, you may be obligated to pay a fee along with your registration, select an agent to act on your behalf in the state and file state tax returns.
Consequences for Noncompliance
Organizations that fail to properly register risk hefty penalties and consequences. Each state is different, but in many places, you may be subject to large fines that accrue each day you conduct business in the state. Another possible negative outcome that comes along with noncompliance arises when you need to pursue legal action against another organization within the state. If you are not properly registered, your legal rights are eliminated in that state.
Expanding the scale of your business into other states is a smart move in order to reach higher profit potential. If your business is going this route, make sure you know how to rightly conduct business in each part of the country. Neglecting to learn about the qualifications can have a big negative impact on your company’s outlook.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.