Foreign Corporation - Purpose of Foreign Corporation Registration

Purpose of Foreign Corporation Registration

The use of foreign corporation registration allows a corporation to operate in multiple jurisdictions as the same organization in all of them. The only alternative would be to register a separate corporation in each jurisdiction, and separate every operation according to the particular jurisdiction to which the operations are taking place. This would mean, for example, a corporation operating in 5 U.S. states would have to have separate domestic corporations in each of the five states, as opposed to having a single corporation registered in one state, and being registered as a foreign corporation in the other four.

For example, many public corporations in the United States are registered in the State of Delaware (because of more favorable corporate governance regulations), or registered in Nevada (because of more favorable tax provisions, privacy and corporate officer liability protection) and then are registered as foreign corporations in all the other states that they do business in. Thus the corporation is a domestic corporation in Delaware or Nevada, and is a foreign corporation in any other state (or country) with which it registers. There may be tax benefits as a result of choosing where a corporation's domestic jurisdiction is located. For example, Texas and Nevada have no state income tax. While Delaware does not have income tax, it does have a substantial corporate privilege tax.