Foreign Entities: A Scary Name for a Simple Idea
This blog provides general information regarding foreign entity registration in Colorado.
What is a foreign entity?
A foreign entity is a term used to define any entity (business, organization, etc.) formed outside the state of Colorado. A foreign entity is either formed under the laws of another state or another country. In contrast, entities formed in Colorado are referred to as domestic entities.
Why must a foreign entity register with the State?
Under Colorado’s Corporations and Associations Act, foreign entities are required to register with the Secretary of State prior to "transacting business" in Colorado. Each business is unique and determining what “transacting business” means requires a fact-specific inquiry. However, Colorado state laws governing when foreign companies must collect state sales tax in their state provide some insight into who may need to register as a foreign entity in the state. To collect state sales tax on sales to Colorado residents, a business must have some type of physical presence in the state. Examples of physical presence include, but are not limited to, a warehouse, a brick-and-mortar store, an office, or a sales representative located in the state. While some exceptions may apply, if your business has one of these physical presences in the State of Colorado, it is more likely than not that you will need to register your LLC as a foreign entity.
Depending on the business, Colorado law provides for certain carve-outs where entities need not register. However, because failure to register may have legal and other consequences, we recommend taking the time to consult with an attorney prior to transacting business within Colorado. Here at GLO, we work with prospective entities to ensure compliance with state laws, saving you time, money, and stress throughout the registration process.
What activities do not constitute a physical presence in the state?
Colorado law specifies what activities do not constitute a physical presence in the state. Therefore, if your company only conducts the following activities, you do not need to register in Colorado as a foreign entity. These activities include, but are not limited to: lawsuits; manager meetings; bank accounts in the state; an office, agency, or person in the state to solely handle your company’s own securities; selling through independent contractors; owning real estate or personal property; or transacting business in interstate commerce. This is not an exhaustive list, so if you’re not sure if your company has a physical presence in the State of Colorado and whether you need to register as a foreign entity, GLO can help guide you through the process and determine which category your business falls under.
How do I register as a foreign entity in Colorado?
To ensure compliance with state law and transact business in Colorado, foreign entities must file a "Statement of Foreign Entity Authority" (SOFEA) online with the Colorado Secretary of State. The Secretary of State website has a sample form that you can download and review for reference. The filing fee for the SOFEA form is $100.
Information on the SOFEA form is similar to the type of information needed to create your LLC in your home state. Some of the information you will be required to provide includes the name your LLC will use in Colorado; the “true name” of your LLC when it was originally organized; the state where you originally formed your LLC; the street address of your LLC’s main office; the name and address of your registered agent in Colorado; the date your LLC will commence business in Colorado; and an authorized signature.
If you need to file a SOFEA, register as a foreign entity, or have any questions about foreign entities, fill out an interest form today to see if GLO can help you.
GLO has prepared this blog to provide general information on legal issues that may be of interest. This blog does not provide legal advice for any specific situation and this does not create an attorney-client relationship between any reader and GLO or its attorneys. GLO engages clients only through specific fee arrangements and signed engagement letters. GLO does not guarantee any results.