By Andrew Deaver

Even though Omaha and Council Bluffs are considered a Metropolitan Area, they are separated by more than the Missouri River. The cities are in different states. Therefore, to do business in both cities, you must register or license your company with the Secretary of State in both Nebraska and Iowa.

Licensing requirements can confuse service and trade businesses like plumbers, roofers, and other contractors who regularly cross state lines.

But it is important to know that if you plan to operate in multiple states, and those states require licensing for your type of business, you must undergo the registration process in every state where you are doing business, whether or not you have a brick-and-mortar location in that state.

What can happen if you operate a business without a registration or a license?

If a company transacts business in a state without registering with the Secretary of State, the state can penalize the company. The penalty can include a fine and, under some state statutes, the people doing business on behalf of the non-complying company can also be fined.

In addition, the state can prevent the company from bringing a suit or proceeding in the state’s courts until it qualifies and registers to do business. Being unable to use the court system is referred to as a “door-closing” provision. The state closes the courthouse doors because they don’t think a foreign company should benefit from the aid of a state’s courts in enforcing its rights when it is (a) violating state law and (b) not paying its fair share. Being unable to file a lawsuit could impact your ability to collect payments or enforce other contract terms. Another good reason to be licensed is if your business is working with a third-party payor, like an insurance company. The small print in the contract may require the business to be licensed in the state where the work is being performed.

What is the difference between domestic companies and foreign companies?

A company, whether doing business as a corporation, LLC (limited liability company), or other statutory business entity, is a “domestic” company only in the state in which it is formed. It is considered a “foreign” company or entity in all other states. States have the power to prohibit foreign entities from doing business within their borders unless they comply with certain conditions the states require. Every state has taken advantage of this power by enacting foreign qualification provisions in their state business entity laws.

Foreign qualification is the procedure by which a corporation, LLC, or other statutory business entity receives the authority to do business in a state other than its formation state. (It is also sometimes referred to as “registration”). The company pays a fee and files a document with the state business entity filing office, which is usually the Secretary of State. The document is generally known as an application for authority. Typically, it is a short form that asks for certain basic information about the company. Once qualified, the company will be subject to other compliance requirements, like maintaining a registered agent and filing an annual report

Income taxes, sales taxes, and licensing are also to be considered and complied with when doing business in states other than the entity’s domestic state.

The benefits of conducting business activities across state lines are numerous. However, compliance obligations increase when companies expand their horizons. Be sure to comply with these obligations. If you have questions about whether your business complies, contact experienced business law attorney Andy Deaver at [email protected].