Chapter 13 - Qualification of foreign corporations

Texas - steps in withdrawing qualification

#1 ascertain franchise tax account status #2 bring franchise tax account current, if it is delinquent #3 once franchise tax account is current, request formal Certificate of Account Status from Texas Comptroller #4 download/complete Texas Form 608 - Certificate of Withdrawal or Registration from SoS website #5 file Texas form 608 and official Certificate of Tax Account Status with Secretary of State

Texas document to become qualified to transact business in the state

Application for Registration of a Foreign For-Profit Corporation

Delaware document to become qualified to transact business in the state

Qualification Certificate of a Foreign Corporation

Texas resource for information on requirements to become qualified to transact business

Texas Business Organizations Code

transacting business

a foreign corporation's engaging in activities for which the state requires permission (qualification)

revocation

action by a state withdrawing a foreign corporation's authority to do business in that state. Normally triggered by some unlawful act by the corporation or its failure to comply with the state's laws

to do business lawfully in other states, a foreign corporation must obtain

authority; that is, be qualified to do business in the states. This helps protect the states' citizens, ensuring that they have some basic information about corporation and are able to sue the corporation and serve its registered agent in the state

how does a corporation's board of directors initiate the process of qualification in other states?

by passing a resolution (or act by written consent) authorizing the officers to take the necessary action to enable the corporation to transact business elsewhere

certificate of good standing (or certificate of existence)

certifies that the corporation is in compliance with that state's regulations

foreign corporation

corporation doing business in a state other than the state in which it was incorporated

domestic corporation

corporation doing business in the state in which it was incorporated

withdrawal of a foreign corporation - requirement of providing forwarding address

corporation must provide an address so that the secretary of state can forward any process for any lawsuit filed later against the corporation

service of process on corporation's registered agent in another state...

counts the same as if it had been served on a registered agent in corporation's home state

Texas Business Organizations Code

does not define what transacting business is, but the Code does define what transacting business is not

what filing an application for withdrawal (or certificate of withdrawal) of a foreign corporation accomplishes

ensures the corporation is no longer subject to service of process, taxes, or annual reporting

examples of omissions by corporation that can trigger revocation

failure to file annual reports failure to pay taxes failure to have a registered agent in the state

Most states require a foreign corporation desiring to do business in those states to:

file an application to transact business in the state appoint a registered agent for service of process pay the appropriate filing fee and taxes

examples of fees and taxes assessed by other state

flat annual sales tax or tax based on the amount of business conducted in the foreign state that year

what a foreign corporation should do when it ceases doing business in another state

formally withdraw from doing business as a foreign corporation in that state

corporate changes - filing requirement in a foreign state

generally, must also file a certified copy of the amended articles or amend its qualification certificate (or application for registration) in any state in which it transacts business as a foreign corporation changing registered agent or registered office is less complicated, usually requiring only a simplified form

Potential consequences of a foreign corporation's doing business in another state without properly qualifying

may result in fines or refusal to allow the corporation to maintain a legal action in the state

does a corporation have a legal existence beyond the borders of its state of incorporation

no legal existence beyond the borders of its state of incorporation

effects of not qualifying to do business in Texas

possible court action by Texas Attorney General Prohibition of corporation from filing a lawsuit in Texas arising out of corporation's business in Texas Personal liability for corporation's debts, obligations, or liabilities

qualifying to transact business

process for seeking permission from foreign jurisdiction to do business therein

withdrawal

process of cancelling authority to do business in a foreign state

state's process for revoking a corporation's authority to transact business in the state

provides delinquency notice corporation is then given a period in which to cure the default. If it does not do so, the secretary of state will revoke its authority to transact business in the state in many states (including Texas), a corporation may apply to be reinstates, especially if revocation resulted for an administrative reason (e.g., failing to file reports or pay taxes)

what a foreign corporation must do to lawfully transact business in a state other than the state of its incorporation

qualify, or be authorized

what usually constitutes "transacting business"

repeated, systematic, and continuing business in the foreign state

what governmental official recognizes corporate status in each state?

secretary of state

What laws govern the types of business in which a foreign corporation may engage in the other state?

the foreign corporation will be subject to that other state's laws that restrict the kinds of business a domestic corporation can engage in

what laws govern a foreign corporation's internal affairs (e.g., amending bylaws, giving notice of meetings)

the law of its state of incorporation

filing of annual reports with other states

usually required

failing to qualify to conduct business in Texas does not affect

validity of contracts entered into by the foreign entity the foreign corporation's right to defend itself in a lawsuit in a Texas court