What is a Foreign Corporation?

Mary McMahon
Mary McMahon

The term “foreign corporation” is used in several different ways around the world, depending on the prevailing laws of the region under discussion. In one sense, it is a corporation organized in a foreign country and controlled by foreign nationals, like a company founded in Germany and doing business in Japan. In a sense specific to the United States, a foreign corporation is a company operating outside the jurisdiction where it was originally established, like a company incorporated in Nevada and registering to do business in Texas.

Woman posing
Woman posing

Companies interested in doing business internationally or in different states, in the case of the United States, are required to register as foreign corporations. The alternative would be to organize a new corporation in every region where the company wanted to do business. This could be inconvenient for a wide variety of reasons. A foreign corporation does business as a single entity no matter where it is, with a single headquarters and management structure.

While doing business in its home jurisdiction, a company is a domestic corporation. It is required to abide by the laws in the region where it was organized, including tax laws, filing requirements, and so forth. There may also be residency requirements, obliging officers of the company to live in the same region the corporation is registered in. During the incorporation process, people usually work with an attorney who specializes in incorporations to make the process go as smoothly as possible and to ensure compliance with legal requirements.

In the United States, rules for incorporation vary from state to state, as do the rules regulating corporate behavior. Nevada and Delaware are two states famous for being friendly to businesses and a number of corporations incorporate in these states to take advantage of their business climate, registering as foreign corporations to do business in other states. Many people who do business with companies based in the United States may have noted that Nevada and Delaware are common sites for corporate headquarters, although the corporations can have branch offices and other locations.

While a foreign corporation is treated differently under the law than a domestic one, it is still subject to the laws in the jurisdiction where it operates. These companies cannot sell goods and services banned in an area where they operate, and they may be required to abide by other regulations as well, as a registered foreign corporation. When corporations extend their operations to new locations, attorneys usually assist them with the process of registering and meeting other legal requirements.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a wiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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