State to State Business Requirements

Business owners often differ in where they decide to incorporate. Some prefer to incorporate in their home state, while others prefer the benefits of corporate friendly states like Delaware or Nevada. However, it is important to consider state requirements, particularly requirements about qualification. 

1) Do I have to operate my business in the state where I incorporate?

The short answer is no. No state requires that you form your company in the state where you are doing business. And states like Delaware do not require that you conduct business in their state.  However, most states mandate that companies not formed there, but are conducting business in their boundaries, file a Certificate of Authority.This document in effect qualifies a business formed in another state to do business in the new state.  So if you form a Delaware LLC but are in fact conducting business in California you will have to qualify your business in California before you can do anything, including opening a bank account. This is much more expensive than simply filling your initial business in California. There are many factors that go into deciding where to form your business ans we recommend you speak with a lawyer or accountant if you are unsure. 

2) What does it mean to qualify in another state?

Qualifying to do business in another state is what happens when you are conducting business in a state other than where you initially formed your business. This may happen as your company grows and you decide to expand it in order to service neighboring states.  In other cases this happens because an individual decides for a number of reasons to form their company in a corporate friendly state like Delaware but plans to actually conduct business somewhere else. In this instance they can take advantage of Delaware laws and courts should they ever be sued, but qualify their business where they are actually located. 

Find the answers to all of your major incorporation questions in our new eBook