Certificate of Authority and how can you obtain it!

A Certificate of Authority demonstrates your legitimacy to conduct business in a state other than the one in which your company was founded. In the majority of states, a Certificate of Authority is necessary. It’s important to remember that each state may have a different name for the document. It may also be referred to as a qualification certificate, application for authority, application for registration, or application to transact business. 

The requirements and procedure for obtaining the certificate can differ by jurisdiction and we are here to break down the process for you.

What is the difference between Certificate of Authority and Tax ID?

Depending on the state, a certificate of authority may have several meanings. Your sales tax ID is included in a Certificate of Authority that the New York Tax Department issues. Your company will be able to issue and accept the majority of New York State sales tax exemption certificates as well as collect sales tax using this certificate.

Why is Certificate of Authority necessary?

Whether you satisfy a state’s requirements for doing business will determine the answer, which may not always be obvious. The quantity and nature of activities that necessitate business registration varies according to state regulations. Actually, the majority of states only include those activities on their list that are not considered doing business there.

Generally speaking, if you meet any of the following five requirements that proves that you are doing business in that state and require a Certificate of Authority:

• You currently have or intend to open a physical establishment there, like a restaurant, office, or warehouse.
• There are workers for you throughout the state.
• In such a state, you frequently enter into legally binding contracts.
• You often have business meetings with clients or consumers there. (Email and phone calls alone are less likely to be seen as “doing business.”)
• Your company generates a consistent and sizable amount of income from operations in the state.

This list is by no means inclusive. Different standards for what constitutes conducting business are set down by state statutes and courts. It is advisable to get legal counsel to determine whether your company needs to foreign qualify and acquire a Certificate of Authority in a specific state.

How to acquire a Certificate of Authority

Consult the directions on the website of the Secretary of State in the jurisdiction where you intend to conduct business if you need to file for a Certificate of Authority or equivalent form. Typically, you can find this information under the headings Foreign Corporation or Foreign LLC.

Before your company can conduct business in a state other than its home state, the international qualification procedure may require additional steps to be completed. Usually, these contain the following:

• Verify the availability of the business name
• Book a meeting with a registered agent
• Request an existence or good standing certificate from your native state.
• File the necessary documentation

In Sum

The foreign state could deny your company the ability to file or maintain a lawsuit or carry out other legal processes in their court system, which is the most significant consequence of failing to get a Certificate of Authority. Your credibility will suffer and moreover, you will lose your authority to enforce a contract or recover damages from a partner or customer. State fines, penalties, and back taxes for the time your business conducted business without a Certificate of Authority are another expensive repercussion. Some states may even impose fines on certain officers or representatives of your company.

Consult with a professional to learn more about NY certificate of authority and the rules and regulations of operating a business in a different state than yours.