Foreign Corporation Laws

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What Is a Foreign Corporation?

A foreign corporation is a corporation that is incorporated in one state, but authorized to do business in one or more other states. For example, a corporation may be formally registered in Delaware, but authorized to do business in California, Florida, and Texas. This corporation would be considered a “domestic corporation” in Delaware, but a “foreign corporation” for its operations in the other states.

Sometimes, the term “foreign corporation” is used to describe an international company abroad that is doing business in the United States.  However, the term most commonly refers to American businesses operating in several different states. Foreign corporations are sometimes called “out-of-state” corporations.

Why Would a Company Choose to Register as a Foreign Corporation?

Many businesses choose to register as foreign corporations simply because it is more practical than incorporating in every state where they have operations. Rather than incorporating in several different states, the business will usually incorporate in the state where its headquarters are located, and then register as a foreign corporation in other states. 

Also, some states maintain special governance rules or various tax incentives for companies that incorporate in their state. Delaware and Nevada are the two most prominent examples of places where such businesses incorporate. Thus, a company might incorporate in Delaware to receive “corporate privilege” tax breaks, and then register as a foreign company in all other states where they have significant business dealings.

Where Would I File a Lawsuit If I Have a Legal Issue with a Foreign Corporation?

Even though the company might be registered and headquartered in one state, it is usually possible to sue a company in another state where they are “transacting business." A general rule of thumb is that if the company has an office or employees in a state, then they are pursuing business in that state, meaning that they can be sued in that state for claims related to their activities in that state. Alternatively, the lawsuit can often be filed in the state where the violation occurred. 

Thus, if you have a legal claim against a foreign corporation that is doing business in the state where you live, you can usually file a lawsuit in your own state.  This is especially true if the injury occurred in that state.

Finally, when determining the proper court for a lawsuit, a court will consider all the factors which would make a particular location convenient for each party.  For example, it would probably be more burdensome for an ordinary citizen to fly to a different state just for the purpose of engaging in a lawsuit, when compared to a representative of a company whose job it is to travel to other states to deal with lawsuits that are filed against the company.

What Does It Mean to “Serve” a Foreign Corporation?

To “serve” a foreign corporation means to deliver the court documents informing them that a lawsuit has been or filed against them. It can often be difficult to serve a foreign corporation because it might not be clear as to where one should deliver the documents.  

Most states require foreign companies to register with their secretary of state, and then appoint a registered agent for that state. The court documents can usually be served to the company’s registered agent in that state. This is generally much easier than trying to track down the company’s president in their state of incorporation. 

Service is frequently delegated to a professional document server whose job it is to serve legal papers to the appropriate person. In some states, you can hand over the papers to a lawyer or to the secretary of state, who will then serve the corporation on your behalf. 

Do I Need a Lawyer for Issues That I Have with a Foreign Corporation?

If you have any legal issues involving a foreign corporation, you may wish to contact a business lawyer for advice. Lawsuits involving a foreign corporation can be complex because they there may be an overlap of the laws of more than one state. If you are interested in creating a foreign corporation, a lawyer can also assist you with the registration documents.  

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Last Modified: 06-03-2014 12:05 PM PDT

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