What Is a Pennsylvania Foreign Corporation?
A Pennsylvania foreign corporation is a corporation that was formed in another state.3 min read
A Pennsylvania foreign corporation is a corporation that was formed in another state. These corporations must be registered in Pennsylvania before they can conduct business in the state. Instead of having separate laws for registering different types of business, Pennsylvania has one general set of rules for registering foreign businesses. The state calls these businesses “foreign associations.”
Foreign vs. Domestic Corporations
In this context, “foreign” does not refer to other countries. Rather, any corporation that was started in another state would be classified as a foreign corporation in Pennsylvania. A domestic corporation, on the other hand, would be one formed in Pennsylvania.
These definitions are common across the United States. A business that is considered domestic in Pennsylvania, for instance, would be foreign in West Virginia. “Foreign” simply means that a business was organized under the laws of a different state.
Doing Business in Pennsylvania
A foreign corporation must register in Pennsylvania if it is “transacting business” or “doing business” in the state. Both terms are used in Pennsylvania law, but neither is clearly defined with respect to foreign business registration.
To get a better idea of what counts as doing business in the state — and therefore requires registration — you can look at the laws regarding state sales tax collection. Foreign businesses are required to collect sales tax from Pennsylvania residents when they have a “nexus with” or “physical presence in” the state. These two terms are often used interchangeably and apply to businesses that have one or more of following in Pennsylvania:
- An office
- A warehouse
- A store
- A sales representative
As you might expect, the rules get a little more complicated when applied to internet sales. However, the general rule is that if you have a physical presence in the state, as defined above, you need to register your business in Pennsylvania.
A few activities are exempt from the rules regarding foreign business registration in Pennsylvania. If your activity in the state is limited to the following, Pennsylvania does not consider you to be doing business in the state and does not require you to register your business:
- Defending your business in legal actions, administrative proceedings, and arbitration
- Obtaining a mortgage or other lien on real estate
- Procuring or soliciting orders that are not binding until they are accepted outside the state
- Carrying out sales through independent contractors
- Having an in-state office to handle the business's securities
- Opening a bank account
- Borrowing or lending money in relation to either personal or real property
Additionally, the following excluded activities and transactions do not require your business to be registered in Pennsylvania:
- A single transaction within a 30-day period that is not part of a series of recurring transactions
- Interstate or foreign commerce transactions
- Debt collection
- Director or shareholder meetings and other internal affairs
- Settlement of claims or disputes, such as lawsuits
- Real estate appraisals, inspections, and purchases
- Ownership, lease, or transfer of property
Registering a Foreign Corporation in Pennsylvania
Before conducting business in Pennsylvania, a foreign corporation must receive authorization, known as a “certificate of authority,” from the Department of State (DOS). This process is known as foreign qualification. File the following forms with the DOS to register your business:
- Application for Certificate of Authority
- Docketing Statement
The same application is used for all business types, and it requires basic information about your business, such as its name and the address of its main office.
Either before or immediately after filing its application, your corporation must also publish a notice of its application or intent to apply for a certificate of authority.
According to the state's foreign corporation law, a certificate of authority cannot be denied simply because a business was formed in a state whose incorporation laws differ from Pennsylvania's. However, the state can deny a foreign business whose name (or one that is confusingly similar to it) is already being used by a domestic business. In that case, you can obtain a certificate of authority by doing one of the following:
- Adopting a fictitious name for your corporation via a resolution from your board of directors, that is not confusingly similar to the names of any domestic businesses.
- Obtaining written consent from the domestic business in question to use the similar or identical name and adding one or more words to ensure that your name is distinguishable.
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