“Registering” a business or company means it may operate in additional states besides the state it was first started in. If your business started in Massachusetts, for example, that would be the only state the business would be considered “domestic” in. Once that business starts transacting outside of the state of Massachusetts, it will be considered a “foreign” (meaning here a non-Florida) corporation in those other states, and it will be subject to that states rules and regulations.
There are rules to foreign qualifying a business. First, the business has to register for a certificate of authority in whatever other state(s) the business will be doing business in, including any and all transactions. The company must pay all required state fees. By doing so, you are notifying the state that a foreign corporation or an LLC is going to be doing business within their specific state. It is important to note that your business will always be responsible for reporting any fees, requirements and taxes in every state that they operate and do business in. Make sure to consider all the pros and cons of the new fees you will be acquiring if you expand your business to other states.
Determining a Business Transaction
To determine if you do indeed need to register your business with the State of Florida, first look at the criteria that needs to be met for a company in this matter. The following list is not complete, and different states will have different criteria.
Pursuant to Fla. Stat. Chapters 607 and 608, some of the factors looked at are if a company:
- Keeps employees in the state
- Takes orders in the state
- Opens and operates a bank account in the state
- Keeps a physical existence in the state
Is Out of State Registration Necessary in Florida?
It may sound easy just to operate a business without registering in a second state that you are doing business in. You may think that there are too many good reasons not to foreign qualify, such as too many upfront fees and ongoing fees associated with foreign qualifying; however, state laws require all companies doing business within their state to “foreign qualify” or register to do business with the State themselves.
Not following these laws may have worse consequences than you may think. If you do not register, you will not have any access to the state’s courts that you are doing business in. If you are in another state and a customer sues your company, it would not be permitted for you to defend yourself in that state’s court system, as you would not be recognized as a legitimate business. Other consequences may be fines, penalties, and the owing of back taxes for whenever you operated a business without being foreign qualified in that state. It makes much more sense to spend the time and effort to register or foreign qualify your company and avoid the hassles and penalties of not doing so.
Should I Register with the State of Florida or Incorporate a separate Florida Company?
To get around registering your business, you can incorporate your business or form your LLC in Florida. What is the difference? Mainly, incorporating or forming your LLC in multiple states forms a domestic company in each of the states, which creates separate entities.
Separate corporations in different states will need to have their own private stock and shareholders, and well as directors and officers. They may be the same for each corporation; however, all the special formalities will still have to be followed for each of them. The downfall of this will be the increase in record keeping that must be performed. Deciding to register your company to do business in Florida means there is only need for one LLC or one corporation; it does not matter the number of states a company has foreign qualifications in. They will only need one set of bylaws, as well as stock, shareholders, directors and officers. The initial and annual meetings between the shareholders and the directors will each only be required to happen once.
Forming a new corporation or an LLC in each state you do your business in does have a perk, however: the separation of liabilities. For example, if a company in one state happens to go bankrupt, your other company’s assets would not be used to pay off the debt of your bankruptcy. For those who choose registration, the separation of liabilities will not apply to your situation, should any arise.
Regardless, it is required and important to have a Registered Agent
A Registered Agent is required whether or not you foreign qualify your company or opt for incorporating. One must be named for each state you are doing business transactions in. Every state will require the registration of a registered agent. Those who are registered agents must live in that state or at least be able to provide a physical address for that state. They must be able to be reached and available during normal business hours. A registered agent takes the responsibility of receiving any important tax and legal company documents. These documents are allowed to include mail from that state, any tax documents from the state’s department of taxation, and any forms of documents or papers that may initiate a lawsuit. See more here.
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