Foreign Qualification Delaware: Everything You Need to Know
Foreign qualification in Delaware is important to be aware of if you want to apply for status as a foreign business corporation in the state.3 min read
Foreign qualification in Delaware is important to be aware of if you want to apply for status as a foreign business corporation in the state. Specifically, foreign qualification, also referred to as a Certificate of Authority, is a process involving the registration of a foreign corporation in the State of Delaware. For example, if you formed a corporation in another state, which is considered your home state, but want to obtain a certificate to do business in Delaware, you will need to ensure that you are qualified to do so. This means that you can’t simply begin doing business in any other state aside from your home state where you are formally and properly registered.
Before you can qualify as a foreign corporation in order to do business in the State of Delaware, you first must ensure that you are actually a formal corporation in another state. If you are not formally operating as a corporation in any other state, then you can’t request foreign qualification in Delaware.
If you are unsure as to whether or not you are doing business in the State of Delaware, you should consider the following factors:
- Does your business have an address in the state?
- Do you sell goods and/or products in Delaware?
- Do you have employees that you are paying in the state?
- Do you have assets through your business in the state?
- Did you open a business bank account or credit card for the business in Delaware?
With regard to business bank accounts, keep in mind that most banks will not open a bank account for a business unless it has officially formed as such in that particular state. Therefore, you likely will be unable to open a business bank account until you obtain foreign qualification.
If you want to qualify as a foreign business in Delaware, along with other states, note that the rules vary by state for foreign qualification. So if you meet the requirements for foreign qualification in Florida as an example, you might not meet the qualifications required in order to do business as a foreign qualification in the State of Delaware.
For example, if you want to obtain foreign qualification in New York, there is a publication requirement, meaning that you must publish your intent to qualify as a foreign business for a number of weeks. This allows other businesses, particularly those with the same name in the State of NY, to indicate that they already do business in the state with that name. While this doesn’t necessarily preclude you from qualifying, you will have to use a different business name when transacting in NY, and not the business name that you use in your home state. While some states have this publication requirement, others do not.
Another example of varying rules include reporting requirements. Pennsylvania has this requirement that is due every 10 years. Other states, however, don’t have ongoing reporting requirements. The State of Delaware requires that all companies, whether domestic or foreign, file an annual report, along with the applicable fee. Therefore, if you want to operate your corporation in your home state, along with Delaware, you will potentially be required to file two annual reports, one in your home state and one in Delaware. This means that you will incur additional fees for such ongoing maintenance and upkeep.
Foreign Qualification Process
The process of foreign qualification differs by state. As noted above, while the requirements differ, the actual process differs too. As the above example demonstrates, certain states have a publication requirement and ongoing annual reporting requirements, while others don’t.
Generally, however, the process is similar in that the following steps must be taken:
- An application must be filled out
- The applicable fee must be paid
- The company must file a Certificate of Formation that was received from the home state
- The company must obtain a Certificate of Good Standing from the Secretary of State’s office in the home state
You can find the application on the Delaware Secretary of State’s website. Along with the application will be the applicable fee. In addition to the application and fee, you’ll need to furnish a copy of your company’s initial Certificate of Formation that you obtained when you registered in your home state. You’ll also have to provide a Certificate of Good Standing, which you will request from your home state’s Secretary of State’s office.
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