Doing Business in Multiple States

During the incorporation process, you may hear terms such as, “foreign corporation”, “foreign LLC” or, “qualification” depending upon the type of entity that is being formed. The term, “foreign”, however does not relate to another country, but rather relates to your home state. This means that if your company is formed as a corporation or limited liability company in one state, but is operating in another state, the state of operation is deemed as the “foreign state”.

This is an important feature of business compliance. To help you understand this issue, let’s tackle the concept of “Qualifying as a Foreign Entity” using the following scenario: Jane Doe formed a limited liability company called XYZ LLC in Delaware, but the business is conducted solely in Florida. In this case, XYZ is a domestic LLC in the State of Delaware and possibly a foreign LLC in the State of Florida.

Why a Foreign Entity Filing?

There are a few situations where a business owner may be required to make this type of filing, including:

Maintaining a brick or mortar location
Hiring Employees
Transacting business that requires special licensing
Deciding to file a Fictitious Name or “Doing Business As “(DBA) in another state
Closing on Real Estate

There are also cases where filing as a Foreign Entity will likely not be required: These include:

Telephone sales
An online business that sells goods to people in other states
National advertising campaigns
Selling through independent contractors

The Process

If you fit any of the filing criteria for a foreign entity, or you have been told to register as a foreign entity, there is a process to file.

To qualify your business, you will undergo a similar process to that of the incorporation or LLC formation. In most states, the document that is filed is called a Certificate of Authority or Foreign Registration. As with any state applications, there are filing fees, which can range from $25 to $750. In most states, there are additional documents that must accompany the Certificate of Authority or Foreign Registration. The documents consist of either a Certificate of Good Standing and/or a Certified Copy of the Articles of Incorporation or Certificate of Formation from the home state. The Certificate of Good Standing will demonstrate that your business is in good standing and that there aren’t any outstanding fees.

A Registered Agent is required when you file as a foreign entity. Most Registered Agent companies provide their services in every state, so you will be able to retain the same Registered Agent service.

Once you have secured all your documents, the Certificate of Authority, Certified Copy and/or Certificate of Good Standing, and any other supporting documentation, can be submitted to the state. Normal processing times vary from one to three weeks.

Additional Requirements

As with other incorporation or LLC filing requirements, a few states have other requirements of Foreign Corporations or LLCs. Arizona, Georgia, Pennsylvania, Nebraska, and New York require that a business advertise or publicize in a local paper that your company is now providing services and conducting business in that state. Many states also require that foreign companies and LLCs file an annual report. In a few states, you will be required to file biennial reports. Of course, there will be filing fees. To aid businesses in this requirement, many states have online portals for filing annual reports.

So now that you have a better understanding about “qualification”, be sure to conduct your due diligence. Check with any state that you plan to do business in and research their laws. A good starting point for research will always be the Secretary of State’s office.

Documents Required for LLP Registration

Limited Liability Partnership is a new form of business and a really convenient form of business. It is more advantageous for the small business firms and the start-up’s to start or carry out their business with the least risk and convenience. This is the form of business which carries the benefit of Limited Liability like a Company as well as achieves the flexibility of the general Partnership. Moreover, the LLP incorporation procedure is not a complex process if everything is done accurately as per the given law and by providing the detailed documents to the RoC- Registrar of Companies.

Hence one shall be aware and careful about the documents required for Incorporation of a Company. List of documents required are mentioned and discussed below:

For the registration of the LLP the Designated Partners needs the following documents:

Required documents for Incorporation:

Documents required can be bifurcated into two parts. Namely:

In respect of Designated Partners
In respect of Registered Office

In respect of Designated Partners

A person being Indian National or a Foreign National can be a designated partner or partner of a Limited Liability Partnership. Documents required are listed below respectively:

The Indian Nationals:

The Indian Nationals will require these documents:

1. PAN Card: (Self-attested by Designated Partner or Partner)

The PAN card copy is a mandatory document for the Incorporation where the Name written in the PAN card will be taken as the name for identity proof thus it is necessary to keep the PAN Card up-to-date (in case of change of name, or marriage) at the time of submitting the documents. In case there is any error in the PAN Card then the process will get stuck.

2. Voter’s ID/ Passport/ Driver’s License: (Self-attested by Designated Partner or Partner)

Any of the above mentioned proofs can be attached with the documents and these proofs should contain the name and details similar to the name and details stated in the PAN Card, in case they are not so then one should get them rectified before submitting them to the RoC. The above mentioned documents can be used as address proof of the Designated Partner’s current address. The documents like Election Card, Ration card, Adhaar Card etc. can also be provided here as proof.

3. Scanned copy of Latest Bank Statement/Telephone or Mobile Bill/Electricity or Gas Bill: (Self-attested by Designated Partner or Partner)

The bills which are to be attached as resident proof and should be latest or recent which can be 2-3 months old and not more than that so as to get accepted. It should contain the name of the Designated Partner as stated under the PAN Card.

4. Scanned copy of passport-sized photograph

The Foreign Nationals:

1. Passport:

The passport of the foreign national is mandatory for the Incorporation as it states the identity of the foreign national. The Passport stating the Name and Date of Birth of the Designated Partner should be apostilled and notarised and should be in English Language. (Translated in case the same is in foreign language)

2. Address Proof:

The Designated Partner can attach any of the below mentioned documents as an address proof:

Driving Licence
Residence Card
Bank Statement
Government issued form of Identity containing Address

3. Residential Proof:

The Designated Partner can attach any of these documents which are Bank statement or any kinds of bills such as Electricity Bills, Telephone Bills, and Mobile Bills. (Appostilled and notarized document)

In respect of Registered Office Address:

The registered office address proof as mentioned below shall be submitted along with the form filed for Certificate of Incorporation in the name of the Limited Liability Partnership:

The document stating the full address of the property where LLP will be registered such as Electricity Bill/Property Tax Bill/ Telephone Bill etc.

NOC, in case of Rented Property: The no objection certificate along with the valid Rent Agreement by the owners of the Property.

Floatation of a Company and Prospectus

Once a company has been registered, it has to take off. This is described as floatation of a company. It is true that a company comes into existence once registered and can immediately upon do business. But a newly formed company often needs to get sufficient capital to take off. The promoters there have to take necessary steps to take off. The promoters there have to take necessary steps to obtain working capital for the successful take off of the company.

Where there is an existing business in the form may be of a sole business or a partnership, which is taken over by the new company, the capital of the former business becomes part of the capital to float the new company. Similarly there is transfer of capital where one company takes over another.

There exist various ways of floating or raising capital for a company. The method is usually affected by the type of company: whether private or public.

Private companies usually rely on equity contributions from their shareholders, though new shares may be issued for cash.

Also, capital may be raised by debentures, loans and overdraft. It could also be floated by private placement. On the other hand, public companies may be financed to take off by equity contributions, debentures, loans and overdraft and private placement. But additionally, it could invite the public to buy shares and purchase its debentures by being quoted in the stock or capital market.

PROSPECTUS

A public company invites the public to subscribe for its shares and debentures through the issuing of a prospectus. Section 48 of the Investments and Securities Act (I.S.A.) provides that it shall not be lawful to issue any form of application for securities in a public company unless the form is issued with a prospectus of the company.

A prospectus is any notice, circular, advertisement, or other invitation offering to the public for subscription or purchase any shares or debentures of a company.

The ISA by section 57(1) provides that no prospectus shall be issued by or on behalf of a company or in relation to an intended company unless, on or before the date of its publication, a copy has been delivered to the Securities and Exchange Commission for registration.

CONTENT OF A PROSPECTUS

By section 50(1) of the Investment and Securities Act every prospectus issued by or on behalf of a company must state:

– The number of founders or management or deferred shares (if any).

– Directors’ qualification shares (if any) and remuneration of the directors as provided in the articles.

– Names, addresses and descriptions of the directors or proposed directors;

– The minimum subscription, which is the amount, which in the opinion of the directors, must be raised through the issue in order to provide sums for the following matters.

a) The price of any property purchased which is to be paid for out of the proceeds of the issue;

b) Any preliminary expenses and underwriting commission payable by the company.

c) Repayment of any money borrowed by the company in view of a and b above

d) The amount to be provided in respect of the matters stated in (iv) otherwise than out of the proceeds of the issues and the sources of such amounts.

– The time of the opening of the subscription lists.

– The amount payable on application and allotment on each share.

– Particulars of shares and debentures issued otherwise than for cash

– Particulars of options on shares or debentures

– Particulars of vendors of properties sold to the company.

– Amount paid for property, stating amount paid for goodwill.

– Date, parties, and general nature of every material contract.

– Names and addresses of the company’s auditors.

– Directors interest in the property proposed to be acquired by the company.

– Preliminary expenses, commission and brokerage.

Promoters remuneration.

EXPERT STATEMENT IN A PROSPECTUS

Where a prospectus includes a statement made by an expert before it is issued, two conditions must be satisfied:

1. He must have given his consent and must not, before delivery of a copy of the prospectus for registration, have withdrawn his written consent to the issue with his statement included;

2. A statement that he has given his consent must be contained in the prospectus.

LIABILITY IN RESPECT OF PROSPECTUS.

Since potential investors in the company know little or nothing about the company, the contents of a prospectus must include material facts as would enable the investing public to make a correct assessment of the true purpose and position of the company. Consequently, the prospectus must not contain false or misleading statements or information. The company and those responsible for the issue of a prospectus that contains misstatements at the action of the subscriber maybe civil or criminal.

CIVIL REMEDIES.

This is both under the common law and the CAMA 2004; and they are:

1. Action by the aggrieved subscriber in damages for fraud under section 562, he may sue for compensation.

2. Action for recession of the contract of allotment (section 571).

To succeed in a claim for damages and /or recession under the common law, such subscribers must prove:

a) That the misstatements is a material statement of facts;

b) That he was induced by the misrepresentation to subscribe for the shares;

c) That the misrepresentation was fraudulent and that it was made by a person acting on behalf of the company;

d) That he suffered loss or damage thereby. Under the CAMA, to succeed, the aggrieved subscriber must prove that the prospectus contained a misstatement which he relied upon and thereby suffered loss.

CRIMINAL PROCEDURES

By section 563, any officer of the company who authorizes the issue of a prospectus, or a statement in lieu of prospectus, which contains untrue statements shall be guilty of an offense and be liable on conviction upon an indictment to imprisonment for a term not exceeding 2 years or fine not exceeding N5, 000 or both; or summary conviction to a term of 3 months or a fine of N500 or both.