What are foreign states?
When you first set up your corporation, you incorporate in one particular state, which is where you file your articles of incorporation and pay the necessary filing fees. All states except for the state you incorporate in are generally referred to as “foreign states.” If your corporation is going to be doing business in foreign states, you generally have to register your corporation with that state as a foreign corporation. This is known as qualifying as a foreign corporation.
The process of qualifying as a foreign corporation is similar to the process of incorporating your corporation. You generally have to file your articles of incorporation (along with any other information required by the foreign state) with the foreign state’s secretary of state. You also usually have to include certain filing fees when you do this and you will have to establish a registered agent who is resident in that state. As with your state of incorporation, you will have to make periodic filings and/or fee payments to the foreign states you are qualified in, so you will have to ensure that you keep on top of this.
While most states require foreign corporations doing business in their states to qualify, many smaller companies generally do not do this. While this is a violation of state law, most states do not actively enforce these violations against small business. However, if you chose not to qualify your corporation, you should realize that you are doing so at your own risk.