Have you ever considered branching out your business into other states? If so, you are considering a "foreign" business entity registration.
However, don't let the term "foreign" mislead you. In business, foreign business entities are simply businesses that have chosen to register themselves in multiple states.
So, for example, if your original business is located in North Carolina but you want to open a new branch in Virginia, you'll have to register your business as a foreign business entity with the Virginia State Corporation Commission (SCC).
In this article, we'll quickly explain how you can register a foreign business entity in Virginia. Note, however, that we're focusing on the interstate definition of "foreign" as opposed to the international version.
Foreign Business Entity Basics
Foreign businesses often base their operations in another state and then register to do business in Virginia.
Any foreign business entity—corporation, LLC, partnership, etc.—that is established in another state must also register with the Virginia SCC to operate in the Commonwealth.
Businesses that fail to register as foreign business entities cannot legally do business in the state.
Importantly, the Clerk who reviews your registration application cannot determine your exemption by the Virginia Code's definition of "transacting business."
Therefore, it is imperative that you meet with a lawyer to discuss your application before you register your foreign business entity in Virginia.
Specifically, it's best to consult with a Virginia-based business attorney for the most reliable and up to date information on the state's business laws.
Keep in mind that there are severe financial and legal reprimands should you fail to properly register your business.
Registration v. Domestication
When you register your foreign business entity, you are obtaining permission to conduct business within that state.
However, you should note that there is a distinction between registration and domestication when it comes to foreign businesses.
"Domestication" refers to the process of registering your business in Virginia with the intent of basing your operations in the Commonwealth.
For example, if you own your own business and you move to Virginia, you would seek to domesticate your business in your new location, rather than register it as a foreign entity.
The key difference between registration and domestication lies in the incorporation, or formation, of the business.
When you register your business as a foreign entity, you are obtaining the ability to conduct business in one state while following the incorporation laws of another.
Conversely, when you domesticate your business, you are changing the state your business is formally incorporated in.
Therefore, if you register your North Carolina business in Virginia, you are a North Carolina-incorporated business that is able to operate in Virginia.
However, if you own a North Carolina business and want to domesticate in Virginia, you are transitioning your business into a Virginia-incorporated business.
This means that your new business entity will be subject to the last of Virginia as opposed to North Carolina.
This distinction is particularly important for businesses that choose to incorporate in Delaware or another state for tax reasons.
You must consult with a lawyer in your current incorporating state to determine whether or not you are able to "re-domesticate" your business in another state.
By Virginia Code, only foreign corporations, LLCs, and business trusts can "re-domesticate" as a Virginia incorporated entity.
How to Register a "Foreign" Business Entity in Virginia
In order to register your foreign business entity in Virginia, you must first complete the adjoining application.
Each business entity that qualifies for Virginia registration has its own application.
It's highly recommended that you consult with a Virginia-based business attorney prior to completing an application. An attorney can determine which application you are responsible for completing.
Additionally, you are responsible for completing any other registrations or licenses.
Once you have completed the proper application for your business, you must also obtain a certified copy of your original organizational documents.
These are the forming documents that you filed with the Secretary of State upon the formation of your business.
The Virginia SCC will request a certified copy upon your original filing of these documents.
Once you complete all the relevant application requirements, you can calculate and pay the registration fee with the Office of the Clerk, alongside any documents pertaining to your application.
Additional Considerations for Foreign Businesses
All foreign businesses must establish a registered agent in Virginia to manage their legal paperwork.
Registered Agent & Office
By law, you are required to establish a registered agent and a registered office for your foreign business entity.
Your registered office must be established in Virginia, otherwise you are not able to conduct business within the state.
In addition, your registered agent must meet all standard requirements of Virginia registered agents. This means that your registered agent must be a resident of Virginia.
Many businesses choose to have an attorney represent the business as the registered agent.
Continuing Responsibilities
Each year, you are responsible for filing an annual report detailing your business activity. This report is mailed to your registered agent for your review.
After you have obtained your report, you must file the report with the Office of the Clerk.
You are also responsible for paying the annual registration fee.
Additional Registration
When you register your business in Virginia, you are responsible for reporting to multiple Virginia entities.
First, you must apply to register your business with the SCC. Then, you file that registration with the Office of the Clerk.
Once your foreign entity is accepted, you are required to register your business with the Virginia Department of Taxation.
This is required no matter what type of business you own.
You must also register with the Virginia Employment Commission if your Virginia business entity has employees.
However, if you are the sole proprietor and there are no additional employees, you are not subject to this requirement.
Conclusion
Foreign business entities often choose to register in Virginia due to the state's incredibly business-friendly laws.
The term "foreign business entity" simply refers to cases where a business incorporated in one state chooses to open an office or otherwise do business in another in a way that requires registration.
Importantly, the foreign business must be careful to follow all of the laws in both states to ensure compliance.
For this reason, it's often wise to discuss your foreign business registration with an attorney in the state you wish to register in before you file any of the paperwork.
Only a local attorney versed in the state's specific laws can help you safely navigate the foreign business registration process.
Further Reading
- How to Start a Business in Virginia: A 10-Step Guide
- How to Get a Small Business License in Virginia
- Piercing the Corporate Veil and Virginia LLCs
- Registering a Business in Virginia
- Virginia Limited Liability Company Taxes
Other Resources
- Foreign Business Entities — A page on the Virginia SCC website that explains all of the basic concepts you need to know to register your foreign business entity in Virginia.
