Different tax laws in different states complicate businesses. You may feel overwhelmed and confused by the different laws, both state laws, and tax laws. This is why conducting business in multiple states is sometimes difficult and confusing.

Laws About Incorporation Of Business

If you are upto incorporating a new business, the best thing is to do it in your home state. By this you can avoid taxation problems arising out of involvement of multiple states. However, now that you want to branch out to other states after incorporating and successfully running the business in your home state, you need to decipher the different tax and state laws in order to prevent your business being pulled up by the taxman. It pays to know the laws about incorporation and conduct of business.

The laws state that:

• If you desire to conduct business in a state other than the state of incorporation of the business, you have to register the business in that state. This is known as a foreign qualification.

• If you want to incorporate a business in a state other than the state where it is physically started, you need to file for a foreign qualification.

• If your partner lives in a state other than your home state and he or she has been engaging with clients near his or her home more than in your home state, you need to file for a foreign qualification in the state of your partner.

What The Law Means By Business

This is the first thing that you need to know since if yours is not business as per law, you don’t need to go into any detail of business law and taxation. In fact, in the virtual world that we live in, jobs need to be defined well so that one can delineate between business, freelancing, etc. If you’re uncertain about your job and want to know whether it constitutes a business or not requiring acquiring a foreign qualify, Yours is a business, if:

• You operate out of a physical office in a state.
• You conduct a frequent meeting with clients in person.
• You earn an appreciable share of your revenue from a particular state.
• One or many of your employees work in that particular state and you pay state payroll tax.
• You applied for acquiring a business license in that state.

Going by these definitions, if you are a consultant performing most of your job online and your clients are spread over a number of states, you need not file for a foreign qualification since you are not conducting business.

What is Foreign Qualification?

Foreign qualification is an application for Certificate of Authority from the state’s Secretary of State. You may also need to furnish a certificate of good standing from your home state or the state where your business has been incorporated or formed.

Significance Of Foreign Qualification

Getting a foreign qualification is a legal obligation. So get to know precisely whether you need to get it or not. If you need, go for it since without it you may land in great trouble.