The choice to expand your business into another state is a monumental decision for a small business owner because it means you’re doing something right! Expanding is, of course, a thrilling process, but it isn’t without its own set of challenges. You can’t expand your business into another state simply by setting up a new shop. Moving into another state requires filing what is called a foreign qualification.

What A Foreign Qualification Is

A foreign qualification is essentially a form of permission to conduct business in another state. In order to expand from one state into another, all corporations and Limited Liability Companies (LLC) must file a foreign qualification. This is because any corporation or LLC is considered domestic to the state it was incorporated into initially and, consequently, as a foreign corporation to all the rest.

So, for example, if your business was incorporated in California and you now wish to expand your business into New York, you need to file a foreign qualification to obtain the authority for operating in New York.

Which State To Choose

If you already know which state you want to expand your business to and have researched it thoroughly, you may wish to apply to that state directly. However, if you are unsure of which state to choose or haven’t done any research yet, there are some places that can be more enticing than others. Nevada, for example, is a popular choice for small businesses because of its status as tax haven, ranking as fifth for most business-friendly tax laws. Another extremely business-friendly state is Delaware, with its favorable economic outlook and modern corporate climate, it also attracts a remarkable number of businesses.

The bottom line is that when you take the step to expand your business into another state, you need to do the research. Not only should you know whether your company will be viable in the state, you should also make sure you’ve done the checked the state’s laws and business friendliness. Proper research and preparation will ensure you don’t expand your business into a state that proves to be unfavorable to your profit line.