For a company to obtain a license in a state other than its state of incorporation or formation, it typically first needs to be authorized to do business in the state. Becoming authorized to do business in a state is commonly referred to as foreign qualification (“foreign” here refers to another state, not another country). Here are five key things that you need to know about foreign qualification as it relates to state licensing:
Regulators compare records
State licensing regulators compare the information that is disclosed in a company’s foreign qualification to its license application. For example, if a company lists an individual as an officer in its license application, then it is expected to have also listed the individual as an officer in its foreign qualification.
Don’t forget to renew
Foreign qualifications typically need to be renewed annually. Failure to renew a foreign qualification may result in falling out of good standing with that particular secretary of state, which may impact the company’s license.
Report changes quickly
If a company changes its name, DBA, address, officers, etc., it needs to expeditiously report the change to the secretary of state of each state in which it is foreign qualified. There are unique forms and procedures for doing so. Waiting until renewal to report changes is rarely recommended.
Timing of changes can be tricky
Often, a state licensing regulator will not approve a change to a license until the change has been made to the related foreign qualification. And to make matters difficult, not all secretaries of state allow change forms to be submitted with future effective dates. This means that on the effective date of a change, a licensee may need to submit change forms to various secretaries of state (to be processed on an expedited basis) and then immediately submit evidence of processing to related state licensing regulators. Obviously, this requires careful planning, communication, and coordination.
Certificate of good standing may not be needed
License applicants are often required to provide evidence that they are appropriately foreign qualified. This is most commonly accomplished through the submission of a certificate of good standing issued by the related secretary of state. But for a company that was foreign qualified in the 60 days prior to license application submission, a certificate of good standing may not be required. Instead, the company would likely just need to provide a file-stamped copy of its foreign qualification application.
APPROVED is here to help with your foreign qualification questions and filings. Be sure to check in with us!