How to Get Foreign Qualification in Colorado

Do you own a limited liability company (LLC) created in a state other than Colorado, but you want to expand your business to the The Centennial State? If so, you’ll need to qualify your foreign LLC in order to transact business in Colorado.

What is a foreign qualification and how do foreign LLCs function within the state of Colorado? In this guide, we’ll answer these questions and more.

Rocket Tip: If you’d rather hire an online service to handle this process for you, many of the best LLC services can handle it for you.

What Is a Foreign Qualification?

A foreign qualification enables your limited liability company to do business in the state of Colorado. It doesn’t matter which state you originally formed your business in ― or in other words, the state your domestic LLC is located in ― as the qualification process to register a foreign LLC in Colorado is the same regardless of where your domestic LLC is based.

The confusion surrounding foreign qualification usually centers on what it means to “do business” in a state outside of your primary state. This gets especially problematic considering some states don’t strictly define what it means to transact business in that state. In Colorado, there is no set definition for “doing business,” however, like many other states, Colorado law does outline certain activities that do not meet the necessary criteria.

What Qualifies as ‘Doing Business’ in Colorado

The Colorado Secretary of State does not provide a definition of “doing business,” but does offer the following advice for businesses that may need to acquire foreign qualification: “Each business is unique - our office can't determine if you need to register. Sometimes other agencies, municipalities, or businesses will require you to file with the Secretary of State. You will need to check with them directly, or with your attorney, for more information as to whether you need to file. Keep in mind that not registering could have legal or other consequences.”

What Does NOT Qualify as ‘Doing Business’ in Colorado

The Secretary of State outlines a list of certain activities that do not qualify as “doing business” in Colorado. The following activities are exempt: “A foreign entity shall not be considered to be transacting business or conducting activities in this state within the meaning of subsection (1) of this section by reason of carrying on in this state any one or more of the following activities:

• Maintaining, defending, or settling in its own behalf any proceeding or dispute;
• Holding meetings of its owners or managers or carrying on other activities concerning its internal affairs;
• Maintaining bank accounts;
• Maintaining offices or agencies for the transfer, exchange, and registration of its own securities or owner's interests, or maintaining trustees or depositories with respect to those securities or owner's interests;
• Selling through independent contractors;
• Soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if the orders require acceptance outside this state before they become contracts;
• Creating, as borrower or lender, or acquiring, indebtedness;
• Creating, as borrower or lender, or acquiring, mortgages or other security interests in real or personal property;
• Securing or collecting debts in its own behalf or enforcing mortgages or security interests in property securing such debts;
• Owning, without more, real or personal property;
• Conducting an isolated transaction that is completed within thirty days and that is not one in the course of repeated transactions of a like nature;
• Transacting business or conducting activities in interstate commerce; and
• In the case of a foreign nonprofit corporation:
  • Granting funds; or
  • Distributing information to its members.”

How to Get Foreign Qualification in Colorado

Foreign entities will need to file a “Statement of Foreign Entity Authority.” If you would like to prevent other businesses in the state from using your name, you can also file a “True Name Registration.” The Secretary of State provide step-by-step instructions to apply for foreign qualification here.

Filing Fee: $100. Payments can be made online with a credit card.

What Is the Penalty for Not Getting Foreign Qualification in Colorado?

The consequences for conducting business in Colorado as an unregistered foreign entity can be severe. The following penalties may apply:

• A fine of no more than $100 per year, in addition to a civil penalty of no more than $5,000
• An unregistered foreign entity cannot maintain any action or proceeding in a Colorado court to collect unpaid debts

Should I Hire a Business Service Provider to File My Colorado Foreign Qualification?

If you don’t want to handle your foreign qualification on your own, you have options. Some entrepreneurs choose to hire a lawyer to prepare and file their Certificate of Authority, which can be a good option if you’re concerned about getting the job done right. However, attorney’s fees can be quite expensive.

The other option is to hire a business service provider like Incfile or ZenBusiness to register your foreign LLC with the state of Colorado.

These companies can typically get your foreign qualification done for a fraction of the price of an attorney. This is our preferred route if you don’t want to go with the DIY option.

Conclusion

The process for getting a foreign qualification in Colorado is simple, but determining whether or not your business needs to foreign qualify can be tricky. Nonetheless, the online process has been streamlined and is relatively inexpensive compared to other states. Considering the varied requirements for foreign entities and the stiff penalties, this is definitely not a process that you should ignore. The penalties can have long lasting consequences for unregistered businesses ― especially if a third party has failed to uphold a contract with you.

We hope this article managed to answer your questions about obtaining a Colorado foreign qualification, and we wish you a prosperous business future!