Chapter Thirteen
Qualification of Foreign
Corporations
Domestic vs. Foreign Corporations
Domestic corporation: Corporation doing business in
the state in which it was formed
Foreign corporation: Corporation doing business in a
state other than the state in which it was formed
Transacting Business

Transacting business: generally, statutory list of
activities in which a corporation can engage in a
foreign state without being required to qualify to
do business therein
Actions that Do Not Qualify as Doing
Business
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MBCA § 15.01(b) states that the following activities do not constitute
transacting business:
1. Maintaining, defending, or settling any proceeding;
2. Holding meetings of the board of directors or shareholders or carrying
on other activities concerning internal corporate affairs;
3. Maintaining bank accounts;
4. Maintaining offices or agencies for the transfer, exchange, and
registration of the corporation’s own securities or maintaining trustees or
depositories with respect to those securities;
5. Selling through independent contractors;
Actions that Do Not Qualify as Doing
Business
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6. Soliciting or obtaining orders, whether by mail or through employees or
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agents or otherwise, if the orders require acceptance outside the state
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before they become contracts;
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7. Creating or acquiring indebtedness, mortgages, and security interests in
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real or personal property;
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8. Securing or collecting debts or enforcing mortgages and security interests
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in property securing the debts;
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9. Owning, without more, real or personal property;
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10. Conducting an isolated transaction that is completed within 30 days
and
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that is not one in the course of repeated transactions of a like nature; and
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11. Transacting business in interstate commerce.
Effects of Failure to Qualify

MBCA § 15.02 provides the following penalties for
transacting business in a foreign jurisdiction without
authority:
 1.
The foreign corporation may not maintain a
proceeding in any court in the foreign state until it
obtains a certificate of authority; and
 2. Monetary penalties will be imposed for each day
the corporation was not properly qualified (not to
exceed a stated amount).
Key Features of Foreign Qualification

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Corporations that intend to transact business in
other states must “qualify” or be approved by the
foreign jurisdiction prior to commencing business in
those states.
Not all activities are considered to be “transacting
business” such that a corporation must qualify in
the foreign state. Some activities are considered
relatively peripheral or isolated and thus do not
require corporate qualification.
Slide 1 of 4
Key Features of Foreign Qualification
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To qualify, the corporation must complete the
foreign state’s form and pay a filing fee. The
corporation must have an agent for service of
process in the foreign jurisdiction. Qualification will
result in the corporation being amendable to
service of process in the foreign state and will
require the corporation to file annual reports and
pay various taxes and fees to the foreign
jurisdiction.
Slide 2 of 4
Key Features of Foreign Qualification
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If a corporation transacts business without
qualifying, it is usually forbidden from instituting
action in that state’s courts and is usually subject to
monetary fines and penalties. A few states take a
harsher approach and provide that acts engaged
in while the corporation was not qualified are void
and that it cannot defend itself in court.
Slide 3 of 4
Key Features of Foreign Qualification
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When a corporation makes changes in its state of
incorporation, it should conduct research to determine
if foreign jurisdictions in which it operates must be
notified of those changes.
Once a corporation ceases doing business in the
foreign jurisdiction, it should withdraw its qualification.
Slide 4 of 4