Dissolving a Foreign Qualification
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What does it mean to Dissolve a Foreign Qualification?
A foreign qualification is a business’s registration statement to carry on business in a state other than the state of formation. Registering to business as a foreign corporation in a state requires the business to update any information in the registration document that changes. The business must pay and annual registration fee. Also, registering subjects the business to that state’s business law and grants the state court personal jurisdiction over the business.
If a business decides to discontinue business operations in that state, it may be to the business’s advantage to dissolve the foreign qualification. Doing so effectively eliminates the annual requirements on the business. Most notably, the business will no longer be subject to personal jurisdiction of that state’s courts for conduct that takes place outside of the state and after revocation of the foreign qualification. Once the revocation is complete, the registered agent can no longer receive service of process.
Voluntary and Involuntary Revocation
To voluntarily revoke the foreign qualification, the business must generally file the appropriate paperwork with the state of registration. Each state will set the cost of filing the revocation documents. In most states, the fee is between $50 - 200, depending upon the type of business entity.
In most jurisdictions, the foreign qualification is involuntarily revoked by the state if the company fails to pay the annual registration fee or fails to make mandatory annual disclosures. Generally, a company must fail to file reports for more than one period before dissolution results. There are also other conditions that may give rise to involuntary revocation, such as failure to maintain company records, failure to update disclosure documents, or inability to locate the registered agent. Involuntary disclosure generally does not entail penalty unless the company continues to do business in the state after revocation. In such a case, the company could face significant tax penalties. If there is an involuntary revocation, the company could also face significant penalties for reinstatement, in addition to any tax penalties for failure to complete an income or sales tax return.
How to Carry Out a Voluntary Revocation
Generally, to carry out a voluntary revocation, a company must file the necessary forms for withdrawal and pay the applicable filing fee. This will generally result in a certificate of withdrawal. The withdrawal documentation will generally require:
• Company name
• The state registration number
• Federal and State Employer Identification Number
• Principal address in state of registration
• Principal address in home state
• Name and Address of Registered Agent in state of registration
• Affidavit that company no longer operating in state and that taxes have been paid.
Some states may require a certificate of good state or a tax compliance certificate from the state’s department of revenue before the state will complete a voluntary withdrawal. Some states may also require an affidavit of resignation from the company’s registered agent in the state.
How Much Will it Cost to Dissolve My Foreign Qualification
The cost of dissolving the foreign qualification depends upon the state, voluntary or involuntary revocation, and whether professional assistance is required. States set their filing fees. A voluntary revocation has an associated filing fee. Involuntary revocation may entail certain tax penalties. Lastly, if you require professional assistance to dissolve the foreign qualification, the service provider will either charge an hourly or set fee. While employing a legal professional is not absolutely necessary, it can be useful to make certain all legal matters are addressed when discontinuing business in a state.