

Ask HN: How do Internet businesses get around foreign registration? - smarterchild

First, a bit of background for anyone unfamiliar:<p>Foreign registration is the requirement for a corporation based in one state to _register_ to do business in another state. You can incorporate in Delaware, for example, but there is a registration requirement to do business in California.
Two things seem clear to me: First, internet businesses do commerce that is very often out of state, and second, it seems highly unlikely that they register in every state they do business in.<p>So my question is this: Am I misinterpreting this part of the law? Or is it just not enforced too strongly?
======
grellas
Every state has a requirement that an out-of-state entity that is "doing
business" within its borders register with it as a foreign corporation (or
LLC) as a pre-condition to transacting such business.

While the requirements vary from state-to-state, there is always some minimum
threshhold that must be met, whether it consists of having a physical presence
in the state, having employees in the state, accepting orders in the state, or
anything else the state authorities consider a minimum threshhold.

Internet companies, like any other, must register in every state in which they
are "doing business" in such a way as to meet the minimum threshhold for that
state. Very often, they do _not_ meet the threshhold requirements and thus do
not need to register.

You are correct as well that these laws are not necessarily strictly enforced.
The normal penalty for failing to register as a foreign corporation, for
example, is that the entity cannot sue or defend itself from a lawsuit in the
state until it does register. However, an entity can usually cure this problem
by registering after-the-fact (and can then avail itself of the courts as
needed). This system sometimes causes companies to be lax about doing such
registrations even when they technically should do them.

That said, as a rough rule of thumb, most companies do not normally need to
register in the various jurisdictions unless they have a physical presence
there. Best practice is to consult with a knowledgeable lawyer on the issue to
make sure.

------
nkurz
While I can't confirm your interpretation of this particular law, I'm certain
that no internet businesses register themselves in every jurisdiction in which
they potentially offer their goods for sale. I'm uncertain whether this is a
matter of interpretation or enforcement, but practically speaking I wouldn't
worry about compliance here. If you go searching for laws that you must obey,
you will likely conclude that there is no possible way to run any business
legally.

