Q & A: What’s “Foreign” About Foreign Qualification?
Harvard Business Services, Inc. began offering compliance services in other states about two years ago. We have found that there is not a great deal of recognition or understanding with regard to Foreign Qualification for Inc.’s and LLC’s in those states outside of Delaware. In fact, most clients express complete shock at the term “foreign” since most are US citizens. Their reaction is justified since they are correct – they are not foreign – however their company typically may be.
Webster’s gives several definitions of the word “foreign”. As far as the process being addressed, the best one offered reads as follows: born in, belonging to, or characteristic of some place or country other than the one under consideration. When we read this definition and carry it to a logistical application – we can make some assumptions. First – we can take the word “country” out of that definition and focus on the word “place”. If the company you plan to operate in one state is incorporated in another state – it is deemed “foreign” by the state it is not incorporated in. Theoretically, the state of incorporation has proper record and documents on file for that process and typically offers authority to do business in their state along with the incorporation process. If every company that filed in DE were operating in DE – this would not be an issue. However, the vast majority of the corporate filings occurring in DE are from other states – so this process is both valid and necessary. So – we can narrow the definition down to a “place” being another “state”.
If you incorporate in one state and operate, have physical presence, revenue trail, predominant transactions or banking in another state – your company will typically need to register as a foreign business entity with that other state. Corporate procedure is still handled in our country by the respective individual states and if you consider how Federal control would negatively impact this issue – we should be very thankful! Each state then becomes its own area of control. Without the process of qualification – companies would exercise mobility without compliance. This would lead to an abundance of legal and taxation issues which would create a logistical nightmare. It is logical to assume that the other states involved will want and need to apply proper regulation.
Aclaración de la Calificación para Relaciones Externas
Filed Under: Blog Posts in Spanish, INC Knowledge
Tags: Foreign Qualification, Spanish
El tema de la calificación de Relaciones Externas requiere una aclaración para que nuestros clientes puedan lograr comprender su significado e importancia. Encontramos que hay algunos supuestos falsos sobre las operaciones en otros estados con una entidad de Delaware. Es por eso que ofrecemos información confiable a los clientes que constituyen su entidad en Delaware, para posteriormente operar o abrir cuentas bancarias en otro estado o estados.
Delaware puede ser el mejor estado en constitución – pero esto no significa que usted puede constituir aquí simplemente y evitar las obligaciones de cumplimiento de otros estados. Este puede ser el mayor error de percepción que enfrentamos y tratamos. En Harvard Business Services, Inc. nos esforzamos por ofrecer servicio y soporte para los clientes antes, durante y después de la incorporación. Ofrecemos servicios completos en la Calificación para Relaciones Externas en los 50 estados.
Muchas actividades de las empresas son de ámbito nacional y cruzan las fronteras estatales con gran frecuencia. La movilidad de las empresas puede ser motivo de cierta confusión en cuanto a su cumplimiento. Como especialistas de Delaware en constituciones; constituimos la mayoría de las entidades en Delaware y asesoramos a cada cliente en cuanto al proceso de calificación en su propio estado o el estado de las operaciones reales. Este proceso es similar en la mayoría de los estados e implica un proceso de solicitud para el gobierno del estado y de una tarifa.
Delaware ofrece el beneficio de no imposición sobre la renta a aquellos que presentan en nuestro estado pero que operan en otras partes y generan ingresos. En esta declaración encontramos la principal razón en la necesidad de calificar la entidad de Delaware en otro estado en donde la compañía opera, contrata a la gente o es dueño de bienes raíces – FISCALIDAD. Dicen que sólo hay dos cosas seguras en la vida – la muerte y los impuestos. Al calificar en los estados de operaciones, la compañía en Delaware se convierte en sujeto pasivo en esos estados. Todos los estados requieren que las empresas que operan en el estado se registren y paguen impuestos y la mayoría de los estados cobran multas e impuestos atrasados cuando descubren empresas que operan dentro de sus fronteras sin pagar impuestos.
La otra necesidad lograda mediante el proceso es uno de – LEGALIDAD. Tras la formación, la entidad sólo es legal y válida en el estado de la presentación. Esto significa que si la empresa es móvil y desea ser reconocida como legítima y válida en el estado actual de las operaciones – se debe cumplir y calificar. De lo contrario, dará lugar a socavar la razón principal para incorporar en el primer lugar – la seguridad de cuestiones de responsabilidad y protección a las personas involucradas. En esencia, la empresa no puede soportar un recurso de impugnación en un estado de operaciones si no ha sido objeto allí.
Otra tema que se aborda a través de calificar es una de las preocupaciones financieras – Bancos. La mayoría de los bancos exigen la validez del certificado de Autoridad (conseguidos a través de la calificación) a fin de abrir una cuenta a aquellos que muestren el registro de la presentación fuera del estado respectivo. La cuenta bancaria es el punto donde el ingreso se canaliza y se considera parte de las operaciones de una empresa.
Existe otra percepción errónea que concierne a las empresas y que parece virtual en naturaleza: los puntos com. Este grupo podría llegar a sentir eso, dado a que no hay ladrillo y mortero o dirección física asociada con las operaciones – se puede evitar la calificación. La respuesta a este problema por lo general es NO – de nuevo volvemos al camino, donde la banca y los ingresos se están produciendo y en donde los servidores están situados.
La constitución en Delaware es el mejor primer paso para su negocio, asegurando un estable y seguro estado de origen, sin embargo, no poner atención e importancia en adherirse a las cuestiones de cumplimiento en otros estados, dejarán a la compañía inestable y vulnerable. Harvard Business Services, Inc. se complace en apoyar a los clientes con la presentación de Delaware y agentes de servicio, así como la calificación en otros estados. Con nuestro servicio de capacitación acelerada habrá una solución oportuna a los problemas de cumplimiento. Si tiene alguna pregunta sobre su estado de residencia – contáctenos hoy!
Click HERE for the English version of this article.
Clarification of Foreign Qualification
The topic of Foreign Qualification needs some further clarification so our clients understand its meaning and importance. We find that there are a few false assumptions concerning operations in other states with a Delaware entity. That’s why we offer reliable information to those clients who form and file in Delaware but then operate or bank in another state or states.
Delaware may be the best state of incorporation – but this does not mean that you can simply file here and avoid other states’ compliance obligations. This is probably the biggest misperception we face and address. At Harvard Business Services, Inc. we strive to offer service and support for clients before, during and after incorporating. We offer complete foreign qualification services in all 50 states.
Many corporate activities are national in scope and they cross state boundaries with great frequency. Corporate mobility can be cause for some confusion regarding compliance. As Delaware filing specialists; we file most entities in Delaware and then advise each client as to the qualification process in their home state or state of actual operations. This process is similar in most states and involves an application process to the state government and a fee.
Delaware offers the benefit of no income taxation to those who file in our state but operate and create revenue elsewhere. In this statement we find the primary reason for the necessity of qualifying the Delaware entity in other state where the company operates, hires people or owns real estate – TAXATION. They say that there are only two sure-things in life – death and taxes. By qualifying in the states of operations the Delaware company becomes taxable in those states. All states require businesses actually operating in the state to register there and pay taxes, and most states charge penalties and back taxes when they catch companies operating within their borders without paying taxes.
The other necessity achieved through the process is one of – LEGALITY. Upon formation, the corporate entity is only legal and valid in the state of filing. This means that if the company is mobile and it desires to be recognized as legal and valid in the actual state of operations – it must comply and qualify. Failure to do so will result in undermining the primary reason for incorporating in the first place – security from issues of liability and protection to the individuals involved. In essence the company may not withstand a legal challenge in a state of operations if it has not qualified there.
Another issue addressed through qualification is one of financial concerns – BANKING. Most banks require the valid Certificate of Authority (achieved through qualification) in order to open an account to those who show record of filing outside that respective state. The bank account is the point where revenue is channeled and is considered part of a company’s operations.
Another misperception concerns companies that seem virtual in nature, such as dot coms. This group may feel that since there is no brick and mortar or physical address associated with operations – they can avoid qualifying. The answer to this issue is typically NO – again we go back to where banking and revenue trail are occurring and where the servers are actually located.
Incorporating in Delaware is the best first step for your business and will ensure a very stable and secure state of origin; however failure to realize and adhere to the compliance issues in other states will leave the company unstable and vulnerable. Harvard Business Services, Inc. is happy to support clients with the Delaware filing and agent service as well as the qualification in other states. With our expedited qualification service there will be a timely resolution to compliance issues. If you have questions concerning your home state – contact us today!
