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Delaware Foreign Qualification

Delaware has one of the most business-friendly environments and legal systems in the nation and this makes it a hotspot for new businesses and startups. If you already have a business in any other state and want to start or expand the existing business in the “first state” then your business has to go through the Delaware foreign qualification process. The process of foreign qualification varies from one state to another and the governing laws may be different for corporations and foreign LLC registration in Delaware. Hence, we have created this guide to help you understand the process of foreign qualification and when you need to foreign qualify.

Introduction to Delaware Foreign Qualification

The state of Delaware is home to more than 1.5 million business entities with 84,675 small business formations in 2019 including foreign corporation registration in Delaware. It is one of the most preferred states by both businesses and investors due to benefits like the flexibility of structuring the ownership, administration, and operation of an entity to fit the needs of owners and investors. Delaware also presents tax advantages, small business incentives, funding and grants, privacy, and a reliable judicial system. The advantages and pro-business environment have been and will continue to attract entrepreneurs for doing business in Delaware for domestic and foreign entities.

What is foreign qualification?

Foreign qualification refers to registration of a business with the office of the secretary of state of a state different from that of its formation or home state. There are several scenarios in which a company may want to opt for Delaware foreign qualification although the most common reason is business expansion. The process of foreign corporation or foreign LLC registration in Delaware will enable a company to pursue growth opportunities in another state or across state borders legally without the need for incorporating or forming a new entity. Let’s look at an example to understand this:

If you have formed a domestic LLC in Nevada then Nevada is considered to be your home state. Now, if you plan to expand your operations to the state of Delaware then you will be required to acquire Delaware foreign qualification in order to register your LLC in the new state.

The foreign LLC or foreign corporation registration in Delaware will ensure you are able to make your business operational. You will be required to apply for and obtain business licenses or permits, hire a registered agent in Delaware, and also maintain annual compliances as required by the state of Delaware as well as Nevada.

When does a company have to foreign qualify?

If you already have a business corporation or LLC in any state in the nation except Delaware and want to expand your existing business or are interested in doing business in Delaware then you will need to register your business in the said state through a process known as foreign qualification. At the same time, it is important to understand the scenarios that will require you to apply for foreign qualification. Let us look at separate examples to understand when you need to and when you will not be required to pursue foreign LLC registration in Delaware.

  • Example#1: You have a retail store in Texas and because of its tremendous success; you want to expand to other states like Delaware. In order to open a new store in Delaware, you will have to go through the process of Delaware foreign qualification as this will help you to register in this state. When you are foreign qualified, you will be able to operate your store in both locations.
  • Example#2: You are a consultant based out of California and you work with multiple clients online across several states including Delaware. Since most of your work is online, you will not be required to file for foreign LLC or foreign corporation registration in Delaware. Business law specifies that earning revenue from multiple states doesn’t translate into the fact that you are actually transacting your business in those states.

Foreign qualification is not mandatory or necessary for all types of businesses or activities in Delaware. To determine if your company requires Delaware foreign qualification; you need to ask a few questions first. They are:

  • Do you have a physical presence like a retail store, restaurant, or any other commercial office space in Delaware?
  • Are you required to apply for a business license or permit in this state?
  • Do you conduct face-to-face or in-person meetings with clients quite frequently in the said state?
  • Does your business generate a substantial percentage of your company’s revenue from Delaware?
  • Does your business have employees working in this state?
  • Are you paying any state payroll taxes in Delaware?

If your answer is “yes” to any or all of the above questions then you will need to file for Delaware foreign qualification.

Expand your business through Delaware foreign Qualification!

Doing business in Delaware

The type of business you are planning to form will be governed by Title 6 and Title 8 of the Delaware Code e.g., foreign corporation registration in Delaware is governed by Title 8, Subchapter XVI of the Delaware Code. You are probably wondering what doing business in Delaware really means. In brief, it refers to the practice of carrying on with the business activities of a company in the state of Delaware when the said company was actually registered in another state. In such a scenario, foreign corporation registration in Delaware is necessary.

When you are doing business in Delaware then it also means that there is a physical presence in the state. The presence could be in the form of:

  • A warehouse in Delaware
  • Commercial space or office in the state
  • A retail store in the state
  • Sales representatives in Delaware

Similarly, there are certain activities that are not considered as doing business in Delaware like having a bank account in Delaware, an isolated transaction in the state, conducting business as a part of interstate commerce, and collecting debts among others.

Foreign Qualify Process

The process of Delaware foreign qualification will depend purely on the form of business you plan to conduct in the state like the foreign LLC registration in Delaware may be different from that of a foreign corporation. However, it is also important to remember that failing to foreign qualify can lead to penalties for noncompliance pursuant to 2 DE Code § 378 (2014 through 146th Gen Ass) for business corporations and 2 DE Code § 18-908 (2014 through 146th Gen Ass) for a limited liability company. The Court of Chancery can even prohibit such a company from doing any business in the Delaware state.

Delaware foreign corporation registration

If your corporation is based out of Delaware and you plan on doing business in Delaware then you will have to foreign qualify. The following steps will help you to identify the requirements for foreign corporation registration in Delaware.

  • Name: The first step towards foreign corporation registration in Delaware is to determine if your chosen name is available. You will need to conduct a name availability search in the Delaware state database. If your chosen name is available then you will need to reserve the name with the Department of State, Division of Corporations. The fee for this is $75.
  • Registered Agent: An important aspect of doing business in Delaware is hiring a registered agent as it is mandatory for service of process pursuant to 2 DE Code § 376 (2014 through 146th Gen Ass). You can hire IncParadise as we possess knowledge of and expertise in Delaware foreign qualification and can help you qualify for the same.
  • Certificate of Existence: It is also known as the certificate of good standing and is required for foreign corporation registration in Delaware. The Certificate of Existence should be dated within 6 months prior to the date of applying for the Qualification of Foreign Corporation. The certificate has to be issued by the original jurisdiction of incorporation of the foreign business entity.
  • Qualification of Foreign Corporation: If you want to apply for Delaware foreign qualification by yourself then you need to download the form from the Delaware Division of Corporations portal. The form is known as the Qualification of Foreign Corporation and has to be submitted along with a Certificate of Existence and a filing fee of $245. The processing of the qualification certificate will take around a week although you have the option of expedited processing.

Do you want to form a Delaware Foreign Corporation?

Delaware foreign LLC registration

If you are planning to start a limited liability company in Delaware and are already doing business in another state then you will need to apply for foreign LLC registration in Delaware. The following steps will help you to identify the requirements for the Delaware foreign qualification for an LLC.

  • Name: The first step towards foreign LLC registration in Delaware is to choose a name and determine if the name is available. You will need to conduct a name availability search through the Delaware state database. If your LLC name is available then you will need to reserve it by submitting the “Application for Reservation of Limited Liability Company Name” along with a fee of $75 to the Department of State, Division of Corporations.
  • Registered Agent: An important aspect of doing business in Delaware is hiring a registered agent as it is mandatory for service of process on registered foreign limited liability companies pursuant to 2 DE Code § 18-910 (2014 through 146th Gen Ass). You can hire IncParadise, one of the most reputable agents in Delaware to assist you with the process of foreign LLC registration in Delaware.
  • Certificate of Existence: A Certificate of Existence also known as the certificate of good standing is required for foreign LLC registration in Delaware. The Certificate of Existence states that the limited liability company exists. This certificate should be dated within 6 months prior to the date of applying for the Certificate of Registration of Foreign Limited Liability Company. The Certificate of Existence will be issued by the original jurisdiction of LLC formation or your home state.
  • Qualification of Foreign LLC: If you want to apply for Delaware foreign qualification by yourself then you need to download the form from the Delaware Division of Corporations portal. The form is known as the Certificate of Registration of Foreign Limited Liability Company and has to be submitted along with a Certificate of Existence and a filing fee of $200. The processing of the qualification certificate will take around a week although you have the option of expedited processing.

Do you want to form a Delaware Foreign LLC?

Need Any Assistance in Applying for Delaware Foreign Qualification?

If you are thinking of doing business in Delaware even if you are operating your LLC or corporation in another state then foreign qualification will help you with registration in this state. As one of the leading registered agents in Delaware and the nation, IncParadise can assist you with the process of foreign LLC or foreign corporation registration in Delaware. We can also help you in acquiring a Certificate of Existence/Certificate of Good Standing from your home state and provide you additional services that will ensure you are in compliance with all requirements pertaining to foreign qualification in Delaware. We provide foreign qualification services in all 50 states, which means that if you plan to expand into any other state apart from Delaware then we can also assist with foreign qualification in those states as well.

Are you ready to apply for Delaware Foreign Qualification?