Many people have started selling products and services online through websites like Amazon or Etsy. However, sometimes people open businesses in states they don’t live in.
States like Delaware are popular with companies because the state’s Chancery Court handles business problems efficiently. But starting your business in a state that is different from the one you live in can come with its ups and downs.
Additional Fees and Filings
One of the things to consider when you start your business in a different state is the added expenses you need to set aside to ensure that your company can operate freely in more states:
- You need to register your business as a foreign entity. You are required to register with every state government where your business operates. You need to “foreign-qualify” your company to legally conduct business within those locations.
- You need to hire a registered agent. Registered agents are required in every state where a business operates. They are authorized to receive legal notices on behalf of the business.
- Each state has its own rules: These can include additional payments and documents you need to fill out for each business location you have.
Domestication
Let’s say your company is officially registered in one state, but you only do business in another. It might be easier to move your company’s official registration to the state where you actually operate. This process is called “domestication,” and most states have rules for how to do it:
- Make sure domestication is allowed in BOTH states (the current and future homes of your company).
- Check to see if your business name is eligible in the state your business is moving to.
- Get certification from your company’s current home state, affirming that your company is in good standing.
- Apply to domesticate in the new state.
- Dissolve your business in its current state. Do NOT dissolve your company before domesticating.
Should You Move Your Business?
When you started your business, plenty of people probably told you to incorporate in Delaware, Nevada, Wyoming, or another business-friendly state. While this is good advice for many companies, it might not be right for every business owner. Whether you’re trying to figure out where to start your company or looking to move operations, Lockhart IP is here to help. Book a consultation with us today!