Foreign Qualification

DEFINITION of 'Foreign Qualification'

Legal permission for a corporation to do business in a state other than its home state. Without first obtaining foreign qualification, a corporation may not legally do business in another state, or if it does, it may not be granted the protection of that state's court system. A corporation that maintains an office and/or seeks clients in another state may be considered a foreign or out-of-state entity and may need to obtain foreign qualification status to officially conduct business out of state. Without this status, the company could receive an injunction against doing business in the state.

BREAKING DOWN 'Foreign Qualification'

The secretary of state is responsible for granting foreign qualification in each state. The typical process for obtaining foreign qualification is to file an application and pay a fee of a few hundred dollars. It may also be necessary to name a company representative who is located in the foreign state and establish a fictitious business name not already in use in that state. The corporation will receive a certificate of foreign qualification when its application is approved. These regulations may also apply to limited partnerships, business trusts and limited liability companies. Foreign qualification rules vary by state.

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