Foreign qualification (FQ) is the process of registering your business with the secretary of state (SOS) office in a state other than the one in which you incorporated or formed your business. FQ enables your company to legally pursue growth opportunities across state borders without having to incorporate a new business entity.
Corporations and LLCs are considered domestic only in their state of incorporation (for corporations) or formation (for LLCs and other entities besides corporations). For example, if you form a limited liability company in Delaware, it is “domestic” in Delaware and considered a “foreign LLC” in any other state.
There are many factors that can lead to a state requiring foreign qualification. The most common are:
- Your company has a physical presence (like a factory or store) in the state.
- Your company has one or more employees in the state.
- Your company accepts orders in the state or has liability to collect sales tax
In 11 states, payroll agencies will require a business to file as a foreign entity with the Secretary of State (SOS) before registering with the appropriate payroll agencies. Middesk currently provides support for foreign qualifications only when it's a prerequisite for payroll taxes by completing the SOS registration on the business’ behalf. Those states are:
- Alabama (AL)
- District of Columbia / Washington, D.C. (DC)
- Idaho (ID)
- Indiana (IN)
- Kentucky (KY)
- Louisiana (LA)
- Missouri (MO)
- New Jersey (NJ)
- New Mexico (NM)
- Oklahoma (OK)
- Vermont (VT)
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