If you intend on doing business outside of the state in which your enterprise is registered, you may need a certificate of authority to do so legally. The requirements and process for acquiring the certificate vary by jurisdiction.
Certificate of authority overview
A certificate of authority is a document that provides states—other than the one in which your business is registered—all of a business's important information, including official name, owners' names, and legal status (limited liability company, corporation, limited partnership, etc.). Another name for a certificate of authority is "foreign qualification": In this case, the term “foreign" refers to any business organized outside the state —not necessarily to international companies. A certificate of authority is the same for any type of business entity, whether it be a partnership, corporation, or LLC (limited liability company).
States that require a certificate of authority have different criteria to determine whether a business needs one. In California, for example, companies that “transact intrastate business" need a certificate of authority. Physical presence, such as having a warehouse or sales representative in the state, would fall into this category.
Applying for a certificate of authority
The process for getting a certificate of authority is generally straightforward, but you must pay special attention to each jurisdiction's requirements.
In addition to filing the state's certificate of authority form and fee, you may also have to get additional documentation to show that your business is in good standing in its home state, i.e., that your company is up to date on taxes and any other documents you are responsible for filing. Some states require that this statement be obtained within a certain time frame of the certificate of authority application, such as 30 or 60 days.
You may also need to check that your business's name is available in the state in which you want to acquire a certificate of authority. If your desired name is already in use, a “doing business as" (DBA) is likely necessary.
A registered agent within the state may also be required so that you have a representative who can receive service of legal process on behalf of your business.
A certificate of authority form is usually filed with the state's agency that regulates businesses, often the Secretary of State. The agency's website is the best source for this information.
Failure to obtain a certificate of authority
If a state requires your business to get a certificate of authority and you fail to do so, you could be subject to penalties and fines as well as back taxes.
If you determine that you need a certificate of authority, you may choose to file all of the appropriate paperwork yourself or work with an online legal document preparation service to complete the requirements. The process may not be complicated, but it is crucial that you are in full compliance with all applicable laws to avoid any legal and tax problems.
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