You own and operate a North Carolina LLC and are ready to expand your business into the Commonwealth of Virginia. Maybe you are a general contractor based in Maryland and just won a contract for a long-term project in Virginia. In terms of business entity compliance, an LLC or corporation formed outside of Virginia is considered a “foreign” entity. The term “foreign” in this context simply means out-of-state.
The basic rule is that you must register your company in every state in which it transacts business. The tricky part can be determining what counts as “transacting business.” Every state has its own definition. Actions that are generally considered transacting business and trigger the foreign qualification requirement include opening an office or retail location or hiring an employee who will be physically located in Virginia.
Conversely, the following activities are specifically NOT considered transacting business:
- Defending a lawsuit
- Holding a company meeting
- Maintaining bank accounts
- Selling through independent contractors
- Owning title to real estate (WARNING: This can be a gray area because it is unclear whether leasing real property – residential or commercial – would constitute transacting business).
The foreign qualification process in Virginia is straightforward, involving a simple application and registration fee. Additional details can be found on the State Corporation Commission (“SCC”) website.
Once you have received your Certificate of Qualification from the SCC, then be sure to consider whether your business activities in Virginia trigger other compliance requirements, such as the need to apply for a city or county business license.
According to the SCC, approximately 40% of all foreign qualification applications are rejected because they were not completed properly or failed to include the required documentation, so consider reaching out to Perkins Law for help getting your out-of-state business qualified in Virginia. We also offer a flat fee registered agent service package for both domestic and foreign business entities doing business in Virginia.
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