Key Takeaways

  • A business may be considered to be "doing business" in a state if it has a physical presence, employees, sales activities, or business licenses in that state.
  • North Carolina uses common criteria similar to Michigan when determining whether a foreign entity must register.
  • Certain activities—such as holding internal meetings, owning property, or isolated transactions—may not qualify as "doing business."
  • Foreign entities must register with the Secretary of State to conduct business in North Carolina and may need to file for certificates of authority.
  • Common exemptions from registration include defending lawsuits, banking, and isolated sales that require out-of-state approval.
  • Understanding what constitutes doing business in Michigan helps contextualize North Carolina’s approach and assists multistate businesses with compliance.

What constitutes doing business in North Carolina involves operating a commercial enterprise to make money. If you are considering operating a business in North Carolina, what it essentially comes down to is your responsibility to collect state sales tax on sales to the state’s residents.

Regardless of whether or not you have registered your business in another state, you will be required to have a physical location in the state. This can be any of the following: a warehouse, a store, an office, or even only a sales representative in the state. 

However, if you did not set your business up as a limited liability company (LLC), you will have to register as a foreign company in the state with the Secretary of State of North Carolina.

Operating as a Foreign Corporation in North Carolina

Being recognized as a foreign corporation in North Carolina does not mean that you’ve set up your business outside of the U.S. What it does mean is that you registered your business in another US state.  It’s a very common term used by states throughout the country because, as opposed to a domestic corporation, which is the term used for a business that operates in the state in which it was formed.

US laws allow businesses to organize in any state they desire regardless of where they do business, in order to take advantage of tax laws, simple filing requirements, or a reputation of being “business friendly.” For instance, popular states for forming LLCs are Delaware, Nevada, Wyoming, South Dakota, Florida, and Alaska.

Therefore, no matter where you have incorporated or formed your business, if you intend to conduct business in another state, you will be considered a foreign corporation in that state and, in most cases, need to register as such with that state.

To determine if you will need to file as a foreign corporation in North Carolina, consider these factors:

  • Did you form your LLC in North Carolina? If the answer is no, then you are a foreign corporation. Do you need to register as such? That depends.
  • Does your business have a physical location in North Carolina? If yes, you should register as a foreign corporation.
  • Do you make money in North Carolina from the sales of merchandise or by providing services to citizens of the state? If yes, you should register as a foreign corporation.
  • Do you pay state payroll taxes because your business has employees in North Carolina? If yes, you should register as a foreign corporation.
  • Did you apply for a business license in North Carolina? If yes, you should register as a foreign corporation.

What Constitutes Doing Business in Michigan (and Why It Matters)

Understanding what constitutes doing business in Michigan is useful for interpreting similar standards in North Carolina, particularly for companies operating in multiple states. Michigan, like North Carolina, considers various business activities to determine whether an entity must register as a foreign entity. These include:

  • Maintaining a physical office or warehouse
  • Employing personnel or contractors in the state
  • Conducting regular sales or business transactions
  • Applying for business or professional licenses
  • Owning or leasing property used for business purposes

However, activities that typically do not constitute doing business include:

  • Holding internal corporate meetings
  • Maintaining a bank account
  • Selling through independent contractors
  • Conducting isolated transactions that are completed outside of Michigan

If your North Carolina-based company engages in similar activities in Michigan, you may be required to register as a foreign entity there—and vice versa. Failing to register when required can lead to penalties, loss of legal standing, and other regulatory consequences.

When You’re Not a Foreign Corporation in North Carolina

If you are an LLC that was not formed in North Carolina, the state’s LLC Act offers exemptions to the need to register as a foreign corporation. These include, but are not limited to, whether your LLC is:

  • Defending or settling a lawsuit in the state.
  • Conducting internal business, such as holding an annual meeting of the members.
  • Has a bank account in North Carolina.
  • Has another individual or business handling the business’ securities.
  • Entering into contracts for orders that require approval outside the state.
  • Collecting debts owed by a business or individual doing business in the state.

Common Exemptions from Registration

Both North Carolina and Michigan provide a list of activities that do not trigger foreign registration requirements. These exemptions aim to reduce burdens for businesses that have minimal or non-recurring operations in the state. Examples of exempt activities in North Carolina may include:

  • Conducting a one-time transaction that is completed within 30 days
  • Engaging in interstate commerce without a physical presence in the state
  • Holding shareholder or board meetings within the state
  • Creating or acquiring indebtedness, mortgages, or security interests
  • Transacting business in another state via an online platform without targeting in-state customers directly

Businesses uncertain about whether their activities qualify for an exemption should seek legal counsel to avoid inadvertent violations.

Registering as a Foreign Corporation in North Carolina

In order to establish your LLC as a foreign corporation in North Carolina, complete an Application for Certificate of Authority for Limited Liability Company with the North Carolina Secretary of State. You will find that the information you’re asked to provide is very similar to that which you needed initially form your LLC. This information includes:

  • The name of your LLC (You may need a new name if the existing one is already in use in the state).
  • State of formation.
  • Address of principal office.
  • Name and address of your registered agent in North Carolina (address cannot be a PO box).
  • Names and addresses for members or managers (if manager-managed) of your LLC.
  • Certificate of Existence (or equivalent) from the Secretary of State of your home state.

In 2017, Forbes Magazine recognized North Carolina as one of the best states for business in the US. If you’re thinking of conducting business in the state, take the required steps to either organize your business there or register as a foreign corporation.

Consequences of Doing Business Without Registration

If your business is required to register in North Carolina but fails to do so, the state can impose a number of penalties and restrictions. These consequences may include:

  • Inability to bring lawsuits in North Carolina courts
  • Fines or penalties imposed by the Secretary of State
  • Tax liabilities, including back taxes and interest
  • Required payment of all fees that would have been due during the period of noncompliance
  • Possible voiding of contracts entered into during the period of unregistered activity

Additionally, operating without proper registration can damage a business’s reputation, jeopardize financing opportunities, and expose the company to legal disputes that could otherwise be avoided.

Frequently Asked Questions

1. What does it mean to be “doing business” in North Carolina? It generally means engaging in regular commercial activities in the state, such as having a location, employees, or making sales.

2. Do I need to register in North Carolina if I only sell online to customers there? Not necessarily. Occasional sales alone might not trigger registration unless you have a physical presence or targeted operations.

3. How is doing business in Michigan different from North Carolina? The criteria are similar—both states assess physical presence, employees, and regular transactions—but the specific thresholds may vary.

4. What happens if I don’t register my foreign business in North Carolina? You could face penalties, lose the right to sue in state courts, and be liable for taxes and fees retroactively.

5. Are there safe harbor exemptions that allow me to operate without registering? Yes. Activities like holding internal meetings or owning a bank account typically do not constitute doing business and may be exempt.

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