If I Have a C Corporation, Can I Operate in Multiple States?

by Joe Stone

All corporations are formed under state law and are distinct legal entities, separate from their owners — the shareholders. A corporation's legal residence, or domicile, is the state where it is formed; it is referred to as a "domestic corporation" of that state. Any corporation can transact business in other states — referred to as "foreign" states — as long as the corporation is in good standing with its domicile state and complies with the foreign state's laws.

Corporation Basics

Creating a corporation requires filing the appropriate document, usually called articles of incorporation, with a state agency. After the articles are accepted for filing, the corporation comes into existence and has the powers and rights conferred on it by state law, including many of the same powers and rights held by any person in the state. Such powers and rights include owning property, buying and selling property, signing contracts and enforcing contracts in court. Every corporation is created as a "C" corporation, which simply refers to the tax rules and regulations for corporations set forth in Subchapter C of the Internal Revenue Code. If the corporation desires a different tax treatment, such as Subchapter S, it must file the appropriate documents with the IRS.

Foreign Corporation Registration

All state laws permit a foreign corporation, whether formed in another state or another country, to conduct business within the state. Before conducting any business, the foreign corporation must register with the state and obtain written authorization to do so, typically referred to as a certificate of authority. The process for obtaining the certificate requires submitting an application using the state's form and submitting it to the state agency that oversees corporations, such as the secretary of state's office. Along with the application, the state will require a document from the corporation's domicile state indicting that it is in good standing with the laws of that state.

Annual Corporate Filings

To maintain good standing with their domicile state, corporations must comply with annual filing requirements. This typically requires updating or verifying the accuracy of the corporate information on record with the state, such as the corporation's principal address, name and address of the registered agent, and names of the current officers and directors. Foreign corporations qualified to do business in the state must comply with similar annual filing requirements. Some states, such as Michigan, require foreign corporations to make the same annual filings as domestic corporations. Other states, such has Nevada, impose additional requirements on foreign corporations, such as requiring an annual publication of a legal notice that sets forth the foreign corporation's information on file with the secretary of state.

Converting State of Domicile

A corporation can change its domicile state if the corporation desires to move its principal location, or headquarters, to another state. Such a move is generally referred to as a "conversion" and most states provide a form of articles of incorporation that includes articles of conversion. Whether a conversion of domicile is right for a corporation depends on the business needs and goals of the corporation.