Doing Business in Multiple States: Foreign Corporations

Does your Arkansas business also conduct business in other States?  If so, you may need to register as a foreign corporation.  Most business owners know that in order to protect their assets it is advisable to properly incorporate their business as either a corporation, LLC, partnership, or additional corporate form available under Arkansas Law.  Future articles on this blog will discuss differences between the various corporate forms.   However, some Arkansas businesses fail to realize that after this step is completed, it is also important to consider whether their business should be registered in other States.

This process is called registering as a Foreign Corporation.  The term may sound misleading, since we are not referring to registering the company outside of the United States.  However, the term is used by most States when describing the process pursuant to which an out-of-state corporation is registered within the State.

Each State has separate requirements for registering your Arkansas company.  Most States will require that you submit a filing fee of several hundred dollars, a Certificate of Good Standing from the Arkansas Secretary of State, and an application detailing general information about your company, including your primary place of business in the State where you are registering.  Often the most difficult requirement is the listing of an “agent for service of process” for the new State.  You will be required to list a local agent, which must be a resident of the new State (or another corporation created in the State).  This might require you to retain a third-party company to serve as your agent, for an additional fee. 

Please consult our office or legal counsel of your choice prior to initiating the process, because depending on the State where you are registering additional requirements might apply.  Most States also have exceptions which may apply to your business and prevent the need to register.  Common exceptions, depending on the State of registration, may include: businesses conducting an isolated transaction, soliciting orders by mail or telephone only, and businesses selling through independent contractors.  Penalties and fines, including interest, may apply if you are conducting business in a State where you are not properly registered, so as always it is important to seek advice from your legal representative.