If this is the case with your company, then you may need to “qualify as a foreigner” within that state. Your LLC or corporation must qualify to do business in any state where you participate in business within the state. This means that at least part of your business is conducted entirely within that state's borders. For example, if your company has a warehouse in another state and you sell and ship from that warehouse to customers within that state, you participate in in-state business in that state.
Things get muddy when business owners have to decide what constitutes “doing business,” so it's important for business owners to understand the risks of playing fast and loose with foreign qualification. While each state adopts its own business entity laws, most state business codes and the common law developed in that state are relatively similar. Second, conducting business in multiple states adds complexity to calculating business tax liability. If the company in which they participate in a state is simply incidental to a larger interstate commercial operation, they may not have to qualify.
The company's physical presence within the state (such as having an office or owning property) influences the determination of whether an activity constitutes doing business. It makes sense for you or your lawyer to find out the rules of the states in which your company participates in any intrastate business. If you come to the conclusion that your activities could be considered intrastate business in some states, it's best to qualify to do business in those states. Most states, including California and New York, provide lists of “safe harbors” that do not constitute doing business (for example, the company must also pay sales tax for any consummate sales in the state if the company has a significant presence in that state).
Each state has its own variations on when a company should qualify as a foreign (out-of-state) corporation or LLC, but they all follow this same basic principle: Companies must qualify in a state if they participate in in-state business in that state. While all states require foreign corporations doing business in the state to qualify, no law contains a comprehensive definition of the term doing business. What Constitutes Doing Business also provides guidelines on what constitutes doing business in Canada, Guam, Puerto Rico and the Virgin Islands.
