Pennsylvania Foreign Qualification
Whether you’re planning a Pennsylvania LLC foreign registration or a foreign incorporation, it’s always essential to identify the various advantages offered by the state. The state of Pennsylvania has always attracted small and medium-sized enterprises primarily due to its excellent geographic location and strong transportation infrastructure. The state is also home to a growing STEM workforce that includes engineers, software specialists, statisticians, mathematicians, physical scientists, and life and social scientists. This not only helps to improve the overall business climate but also plays a key role in industry innovation. The process for a Pennsylvania foreign business registration also ensures that you or your company has access to state business incentives and tax credit programs that offer several long-term benefits.
What is a Pennsylvania foreign qualification?
The terminology, foreign qualification in Pennsylvania can sound overwhelming and you may think that this refers to the registration of international companies; however that is not the case. When it comes to Pennsylvania state laws like the Pennsylvania Consolidated & Unconsolidated Statutes and the governing authorities, foreign qualification simply refers to the operations of a company in a state or jurisdiction that is different from the entity’s state of formation. This applies to different entity structures such as limited liability companies (LLCs), corporations, limited liability partnerships (LLPs), and limited partnerships (LPs). The process and requirements may vary from one state to another and you’ll also need to conduct a Pennsylvania foreign entity search before registering in the foreign state. Let’s look at an example to understand this:
Example: You have formed a domestic corporation in Massachusetts by filing the Articles of Organization. Here, Massachusetts is considered to be your home state or state of incorporation. Now, if you want to expand your business to Pennsylvania, there are two options. One is to close your existing business and incorporate a new company in Pennsylvania. The second option is a Pennsylvania foreign corporation registration or foreign qualification.” This process will provide you with the authority to transact business in Pennsylvania without the need to close your company in Massachusetts.
Doing business in Pennsylvania?
Generally speaking, corporations, limited liability companies, and any other business entities can’t just transact business in any state that they want to, other than their initial state of registration. All business entities require permission from the state that they want to transact business in that is outside of their home state. Hence, Pennsylvania foreign business registration becomes necessary. Permission to do business in Pennsylvania is governed by the process of a foreign qualification. Each state in the USA has separate laws for defining business transactions, making it important to understand the concept of doing business in this particular state.
The Pennsylvania Consolidated & Unconsolidated Statutes provide an insight into the various activities of a foreign entity that do not constitute doing business in Pennsylvania. According to 15 PA Cons Stat § 403 (2020), not doing business includes:
- Mediating, maintaining, arbitrating, defending, or settling a proceeding or an action
- Carrying out any activity related to the entity’s internal affairs like holding meetings
- Maintaining business bank accounts in financial institutions in Pennsylvania
- Selling products or services through independent contractors in this state
- Maintaining an office or agency for the exchange, transfer, and registration of securities
- Acquiring or creating indebtedness or security interests in Pennsylvania property
- Transacting business in foreign or interstate commerce
- Conducting an isolated transaction