How to get Foreign Qualification in North Dakota

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

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

What Is a Foreign Qualification?

A foreign qualification enables your limited liability company to do business in the state of North Dakota. 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 North Dakota 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. North Dakota state law does not provide a definition of “doing business” in the state.

What Qualifies as ‘Doing Business’ in North Dakota

Since there is no definition of “doing business” in North Dakota, each entity is evaluated on a case-by-case basis to determine if it is, in fact, doing business in the state. However, in general, you will need to form a foreign LLC in North Dakota if your business pursues any of the following activities in this state:

• Having a commercial domicile in the state
• Owning or leasing property in the state
• Having one or more individuals performing services in the state
• Directing activities at North Dakota customers for the purpose of selling them goods or services
• Deriving income from, or attributable to, sources within this state

What Does NOT Qualify as ‘Doing Business’ in North Dakota

Meanwhile, according to North Dakota state law, the following activities are not considered to be “doing business,” and you do not need to qualify a foreign LLC to pursue them:

• “Maintaining, defending, or settling any proceeding;
• Holding meetings of its shareholders or carrying on other activities concerning internal affairs;
• Maintaining bank accounts;
• Maintaining offices or agencies for the transfer, exchange, and registration of the foreign corporation’s own securities or maintaining trustees or depositaries with respect to those securities;
• 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 or acquiring indebtedness, mortgages, and security interests in real or personal property;
• Securing or collecting debts or enforcing mortgages and security interests in property securing the debts; or
• Conducting an isolated transaction that is completed within thirty days and that is not one in the course of repeated transactions of a like manner.”

Additionally, North Dakota provides the following stipulation regarding foreign corporations:

• “For purposes of this section, any foreign corporation that owns income-producing real or tangible personal property in this state, other than property exempted under subsection 1, will be considered transacting business in this state.”

How to Get Foreign Qualification in North Dakota

If you want to foreign qualify your LLC in North Dakota, you will need to file a Certificate of Authority Application with the Secretary of State. The information and documents required with the Certificate of Authority include:

• Business name
• Type of Business
• Trade name (if applicable)
• Names and addresses of business managers
• Certificate of Good Standing (must be obtained from the proper authorities in the business’ state of formation)
• Certificate of professional license (if applicable)
• Signed consent to use business name (if applicable)
• Trade name registration (if applicable)
• Signature

Filing Fee: $135, with the check made payable to the “Secretary of State.”

What Is the Penalty for Not Getting Foreign Qualification in North Dakota?

There are three major penalties for failing to qualify a foreign LLC in North Dakota. First, your business will not be able to file a lawsuit in a North Dakota court. Second, your business will be liable for a civil penalty of up to $5,000 and may not be able to continue doing business until all fines are paid. And third, all LLC managers and members who participated in doing business in the state will be liable for a civil penalty of up to $1,000 each.

Should I Hire a Business Service Provider to File My North Dakota 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 North Dakota.

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 the state of North Dakota isn’t particularly complicated, however it does require a few more steps than some other states. For example, you will need to obtain a Certificate of Existence and possibly a certificate of professional license in advance. Additionally, the penalties for non-compliance are harsher than in most other states. This is not a process that should be taken lightly, because the consequences could seriously impact the future of your business activities in North Dakota.

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