Certificate of Authority

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 1,822 reviews

Jump to Section

Need help with a Certificate of Authority?

Post Project Now

Post Your Project (It's Free)

Get Bids to Compare

 Hire Your Lawyer

What is a Certificate of Authority?

A certificate of authority is a legal document that allows an entity to legally conduct business in a state—other than where it was initially registered as an S Corp, non-profit, C Corp, or LLC.

The document’s name can vary based on a state. It can be referred to as a Qualification Certificate, Application for Authority, Application to Transact Business, or Application for Registration, but is popularly known as Foreign Qualification.

When you talk of Foreign Qualification, the term ‘foreign’ here refers to other states—without necessarily going international. Typically, the document is the same regardless of the type of business in question.

Types of Certificates of Authority

However, you can also use the term Certificate of Authority to refer to a few different things. We will discuss a few types of Certificates of Authority to give you a more detailed overview of what they are.

Type 1: Conducting Business in Another State

Here, we discuss the foreign qualification obtained when a business wants to conduct operations legally in another state outside its initial formation. For example, suppose a business entity filed articles of association in Nevada. In that case, it will need a Certificate of Authority to conduct business in California.

The different states set distinct compliance requirements for foreign qualification, and businesses seeking certification must abide by the rules and the regulations. Individual states also use different criteria for defining ‘conducting business.’ Still, generally, an enterprise is said to conduct business in a state if:

  • It has a physical address in that state
  • Holds meetings with clients in that state
  • Has employees working or living in that state
  • Is liable for sales tax on the goods and services it sells in that state
  • It regularly makes contracts with parties in that state

However, this is by no means the comprehensive criteria for determining whether an entity conducts business. Moreover, the criteria for doing business can vary in different statutes.

Meet some lawyers on our platform

Gregory B.

34 projects on CC
View Profile

Craig Y.

2 projects on CC
View Profile

Jane C.

57 projects on CC
View Profile

Terence B.

42 projects on CC
View Profile

Type 2: Industry-Specific Certificates of Authority

In some states, you may need a Certificate of Authority to conduct business in a specific industry or if you want to meet a particular purpose. We will explain a few examples of Certificates of Authority under this category.

Example 1: Insurance Certificate of Authority

Suppose you want to start an insurance company. In that case, you need to obtain the licensing to operate in the insurance industry legally. Here, your business may request the certification from two different perspectives.

  • During the primary application. The request for a Certificate of Authority when opening the company in a particular state
  • When expanding the business. The request for certification to provide insurance services in states other than where you registered the company

Example 2: Tax Certificate of Authority

In most states, businesses that sell goods or services subject to sales tax must obtain a Tax Certificate of Authority. The certificate gives the business the authority to collect taxes. They can also issue and collect exemption certificates on sales tax.

The business will have to apply for the certificate from the tax authority and pay a fee. It gets assigned the certificate with a sales tax identification number upon approval. The certificate is renewable periodically.

If the business has multiple locations within the same state, each location must have its license and display it prominently at the site.

Here is an article that also defines the Certificate of Authority.

Purpose of a Certificate of Authority

The purpose of a Certificate of Authority varies depending on the type. However, it is of utmost importance for a foreign qualification to operate in multiple states.

The document's primary purpose is to help your business legally conduct its operations in different states. It is proof that the entity operates lawfully and in compliance with the state’s requirements. A company that lacks the certificate cannot conduct business in other states.

ContractsCounsel Certificate of Authority Image

Image via Pexels by Karolina Grabowska

Do I Need a Certificate of Authority?

If you plan to expand your business operations to other states, it’s a significant milestone for your business. First, however, you need to take a couple of steps, and obtaining a Certificate of Authority is one of them.

Each state has different laws and regulations, so you will have to apply for the certificate in the specific states you want to venture. Otherwise, you will not have the right to sell goods or provide services in these states, which is the most significant reason you need the certificate.

Also, it’s important to note that if you carry out activities that constitute conducting business in a particular state without a Certificate of Authority, you could be liable for tax backs, penalties, and fines.

Additionally, your business may not start or maintain a lawsuit or carry out legal proceedings in a court of law. That means you will not have the right to enforce contracts or recover damages.

Here is an article about the Certificate of Authority.

How To Get a Certificate of Authority

Give your company the authority it needs to conduct business outside its home states. Generally, you acquire a Certificate of Authority upon application and payment of fees. The fees and other jurisdictional requirements vary based on the state.

Here are four basic steps for Foreign Qualification.

Step 1: Confirm availability of the name

A name search helps you know if the company’s name in its articles of incorporation is available in the state of qualification. The availability here means no other entity uses a similar name in the Secretary of State’s records.

If it is available, reserve it so that no other business registers under the name. If it is not available, the Secretary of State can qualify your company as a ‘ doing business as ’ (DBA).

Step 2: Appoint a registered agent

Registered agents or corporate lawyers will act on behalf of your business in the foreign state. You must appoint a professional agency that will receive progress and other important communication on behalf of your business.

Step 3: Order a certificate of good standing

Many states will require proof that your company is in good standing in its registered state. Here, the Certificate of Good Standing proves that the company meets the operating agreement in the home state. A business can fall out of good standing by failing to pay taxes or file annual reports.

Step 4: File application documents and pay the fees

Once you’ve clear about the name status of your company and have a registered agent, you can file the application and pay the necessary fees. Research the fee payable in specific states since the amounts differ. Your registered agent should have the experience and expertise to handle this step and execute it on behalf of your company.

The application document should include a range of company information like:

  • Company name
  • Date of incorporation
  • Physical location
  • Name and location of registered agent
  • Name and address of members or officers
  • Name of authorized shares and listings of stocks
  • Financial information
  • Type of business the company will carry out and corporate bylaws

However, the above is not a comprehensive list of the required information. The requirements vary from one state to another.

Benefits of a Certificate of Authority

The primary benefit of Foreign Qualification is that your business can operate in another state legally. It is an excellent opportunity for expansion and growth. Besides that, other advantages include:

  • Ability to start and maintain legal proceedings
  • Your business avoids penalties and fines
  • Your business wins the trust of clients
  • The business can remain an LLC
  • The business saves the cost of incorporation in every state

Get Help With Foreign Qualification

While the foreign qualification process appears straightforward, there are several legal implications. As a result, seeking legal assistance can help you with the guidance you need and avoid possible complexities in the process of qualification.

Post a project today and receive bids from qualified attorneys to help you.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Certificate of Authority Lawyers

ContractsCounsel verified
25 years practicing
Free Consultation

Experienced legal counsel to entrepreneurs, small businesses, and investors. Advising clients starting, buying, selling, operating, financing, and investing in businesses // U.S. Army Veteran // Dog Lover // Ironman Triathlete, Marathoner, Open Water Swimmer, USAT Triathlon Coach // Oenophile

ContractsCounsel verified
16 years practicing
Free Consultation

Licensed attorney in KY and Federally JD, 2006 University of Louisville MBA, 2006 University of Louisville BS, 2001 Berea College Licensed Title Agent Arbitrator and Certified Mediator Business Consultant Adjunct Professor, Law and Business

ContractsCounsel verified
Shareholder Attorney
30 years practicing
Free Consultation

Experience as lawyer in large, small and solo firm settings and as in-house General Counsel for a manufacturing business. Expertise in commercial contracts between businesses, business sale and purchase contracts, employment contracts, intellectual property licensing and work-for-hire agreements. Additional expertise in trademark application and prosecution, copyright registration, appeals work in areas of intellectual property and employment law, business formation and governance documents, state and federal employment matters under the FSLA, construction agreements, Lien law, LLC Start-ups, Operating Agreements, partnerships, S-Corp set ups, Nonprofit Corporations, NDAs, executive and employee contracts, independent contractor agreements, severance, and restrictive covenants agreements, and employment/wrongful termination disputes, franchising law, real estate transactions for business and personal property, Asset Purchase Agreements, personal and commercial leases, drafting wills, estate planning documents, prenuptial and postnuptial agreements, marital property agreements, Promissory Note Agreements, Security Agreements, Personal Guarantees, and land contract sales and purchases; technology agreements, website policy agreements, privacy, copyright, and terms of use agreements, SaaS agreements, landlord/tenant law.

ContractsCounsel verified
18 years practicing
Free Consultation

I'm an employment lawyer. I counsel and represent employees in all professions, from hourly workers to doctors and all in between. I also counsel and represent employers in many aspects of employment law.

ContractsCounsel verified
4 years practicing
Free Consultation

I provide comprehensive legal and business consulting services to entrepreneurs, startups and small businesses. My practice focuses on start-up foundations, business growth through contractual relationships and ventures, and business purchase and sales. Attorney with a demonstrated history of working in the corporate law industry and commercial litigation. Member of the Bar for the State of New York and United States Federal Courts for the Southern and Eastern Districts of New York, Southern and eastern District Bankruptcy Courts and the Second Circuit Court of Appeals. Skilled in business law, federal court commercial litigation, corporate governance and debt restructuring.

Abhijit "Beej" D.

ContractsCounsel verified
Managing Director
22 years practicing
Free Consultation

Beej serves as counsel to innovators and entrepreneurs in a wide array of legal and business matters worldwide.

ContractsCounsel verified
Principal | Attorney
23 years practicing
Free Consultation

I am a corporate and business attorney in Orange County, CA. I advise start-ups, early-growth companies, investors, and entrepreneurs in various sectors and industries including technology, entertainment, digital media, healthcare, and biomedical.

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call