Although it sounds odd, if you formed your corporation or LLC in New Jersey, the State of New York considers you a foreign business. Only in New Jersey are you considered a domestic corporation. It is the same with each state across the country. If you want to do business in a state other than your own, you are required to file with that state’s Department of State. The process is called foreign qualification.
If you operate an online or mail order business, you may be exempt from the foreign qualification requirement. If you add a brick-and-mortar presence in a foreign state – an office or warehouse – this may change your status. A tax lawyer can determine which states require you register your online business.
For storefront retailers and manufacturers, a physical presence, buildings and/or employees, usually requires foreign qualification. Each state has different standards, fee schedules and tax codes. Tax attorney’s, although licensed by individual state bar associations, know and understand the requirements of each state. Failure to meet the requirements for foreign qualification will result in back taxes owed, fines and penalties, a costly proposition.
While each state has different rules, generally, before engaging in business in any state, you must register with the foreign state and pay the required fees. You must conduct a search of businesses in the state to determine if your company’s name is available. Another business may already be using your name. If this is the case, you will need to assume a new name for operations in that state. You must also select a registered agent to act as a liaison between your home state and the foreign state. A tax lawyer can handle these processes for you.
There may be tax advantages to forming your corporation or LLC in states other than the one you call home. You may want to incorporate in several different states. A tax attorney can advise you on the advantages and disadvantages of incorporating in each state and recommend how you should structure your business to keep your tax obligations to a minimum.