So you just moved to North Carolina, you've brought you out of state business with you, and you're ready to set up shop. You're all set, right? Wrong! The questions remain: did you get a Certificate of Authority from the North Carolina Secretary of State to operate here? And if you didn't, what are the consequences of not doing so?
Allow me to explain…
Businesses that originated outside of North Carolina and are now doing business in North Carolina are known as “foreign corporations”. Keep in mind this does not mean “foreign” as in from another country! This means any corporation that did not originate in North Carolina, so if your business is from any other state in the U.S. you are considered a foreign corporation.
For a foreign corporation to operate legally in North Carolina they need to apply for a Certificate of Authority with the North Carolina Secretary of State. Once this Certificate of Authority is obtained then you are free to operate in North Carolina legally.
What are the consequences of not doing so?
In short: (1) fines, and (2) loss of legal rights. The fines for operating a business without a Certificate of Authority are $10.00 a day, with a maximum of $1,000.00 per year. This by itself does not seem horrendous, however, it should be noted that the state can seek this money for all the years you have been in business without a Certificate of Authority. This means that if you have been operating without the certificate for 10 years, your business may owe $10,000.00 plus fees and taxes that would have been assessed were you to have properly applied for the Certificate of Authority.
Another huge implication for a business owner who does not have a Certificate of Authority with the state is that they lose the right to maintain any proceeding, in any court, in North Carolina. The implications of this cannot be understated! If you do not have a Certificate of Authority you cannot bring any legal action on behalf of your business to a North Carolina court. Needless to say, it is unwise for a business to operate in a state in which they are not on an equal playing field with their competitors!
Therefore, if you believe that your out of state business does not possess a Certificate of Authority to legally operate in North Carolina – consult with a lawyer immediately to protect your wallet and your rights!