Simone Lawson
The definition of doing business in New York is a complex issue, with no precise definition provided by the law. Instead, a non-exhaustive list of activities that do not constitute doing business is offered. This has resulted in a detailed analysis of a company's activities to determine if they require authorization to operate in the state. The New York Department of State does not provide opinions on what activities constitute doing business for qualification purposes. To gain authority, a foreign corporation must complete an Application for Authority, obtain consent from the New York State Tax Commission, and pay a filing fee of $225. If a foreign corporation does business in New York without authorization, it cannot take legal action in the state until it has obtained permission and paid the necessary fees and taxes.
| Characteristics | Values |
|---|---|
| Definition of "doing business" in New York | No precise definition, the law offers a non-exclusive list of activities that do not constitute doing business |
| Qualification doing business test | When a business must apply for the authority to do business in New York |
| Jurisdiction doing business test | When a business's activities within New York subject it to the personal jurisdiction of New York courts |
| Taxation doing business test | When these activities trigger tax obligations within New York |
| Foreign corporation without authority to do business in New York | May obtain such authority after commencing an action and thereby become qualified to maintain the action |
| Foreign corporation doing business in New York without authority | Cannot maintain an action in the state unless it has been authorized to do business in New York and has paid all necessary fees, taxes, and related penalty and interest charges |
| Foreign corporation with authority to do business in New York | Must obtain the consent of the New York State Tax Commission |
| Application for Authority with the Department of State | Must be accompanied by a Certificate of Existence from the official who files and maintains corporate records in the jurisdiction of the corporation, dated within one year |
| Filing fee for Application for Authority | $225 |
| Payment methods | Cash, check, money order, MasterCard, Visa or American Express |
| Checks | All over $500 must be certified |
| Expedited Handling Services | Additional fees for processing time-sensitive documents |
| Fictitious name | If the true name of the corporation is not available for use in New York State, a fictitious name must be designated in the Application for Authority |
| Examples of "doing business" in New York | Manufacturing, maintaining a small office with full-time employees, systematic and continuous solicitation and servicing of New York accounts by a foreign sales agency through on-site representatives, owning and leasing real estate as a foreign entity's sole purpose |
| Examples of activities that do not constitute "doing business" in New York | Entering into one or two contracts, advertising a foreign company's business in New York newspapers, conducting research and employee training (unless the organization's primary purpose is research and training), occasional or casual corporate presence without additional substantial activity |
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What You'll Learn
The jurisdictional doing business test
The definition of "doing business" in New York is often a source of confusion, as the law does not provide a precise definition. Instead, it offers a non-exhaustive list of activities that do not constitute doing business. This makes it challenging to determine when a business needs to register and comply with the state's requirements.
To determine if a company is subject to the jurisdiction of New York courts, it is essential to analyse the nature and extent of its activities in the state. For example, a foreign manufacturing organization operating in New York would likely qualify as "doing business" if manufacturing is a substantial part of its regular business. On the other hand, conducting research and employee training in New York may not meet the threshold unless the primary purpose of the organization is research and training.
Maintaining a small office in New York with a mix of full-time and part-time employees could also be considered "doing business," especially if they are servicing local accounts. Similarly, if a foreign company specifically targets New York consumers through an extensive ad campaign, it may be deemed to be "doing business" in the state.
In summary, the jurisdictional doing business test evaluates whether a company's activities in New York are substantial and continuous enough to bring it under the jurisdiction of New York courts. This test helps businesses understand their legal obligations and potential liabilities when operating in the state.
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Taxation doing business test
The definition of "doing business" in New York is often a source of confusion. The New York Department of State does not provide opinions on what constitutes doing business in the state for qualification purposes. However, the state has laid out a set of criteria to determine whether a business must be qualified to operate in the state.
To determine if a business triggers tax obligations in New York, courts apply the Commerce Clause principles elucidated in *Complete Auto Transit v. Brady*, which lays out a four-pronged approach:
- The business activity must be taxed by the state.
- The tax must be fairly related to the services provided by the state.
- The tax must be applied to an activity with a substantial nexus to the state.
- The tax must be fairly apportioned.
For example, a foreign manufacturing organization operating in New York qualifies as "doing business" because manufacturing constitutes a substantial part of its regular business. Conversely, conducting research and employee training in New York does not meet the threshold for requiring registration unless the organization's primary purpose is research and training.
Occasional or casual corporate presence in New York, without additional substantial activity, doesn't amount to "doing business." However, maintaining a small New York office with a few full-time and part-time employees was deemed "doing business" in the state.
If a foreign corporation has been conducting business in New York State before filing its Application for Authority, it must obtain the consent of the New York State Tax Commission. The application must be accompanied by a Certificate of Existence from the official who files and maintains corporate records in the jurisdiction of the corporation, typically dated within one year and with the necessary fees.
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Qualification doing business test
The definition of "doing business" in New York is often a source of confusion. The New York Department of State does not give opinions on what activities constitute doing business in the state for qualification purposes. However, there are three distinct concepts to consider when determining whether a business qualifies as "doing business" in New York:
- Jurisdictional doing business test: This involves assessing when a business's activities within New York subject it to the personal jurisdiction of New York courts. Courts closely examine the company's activities within the state, as well as any activities outside the state that are directed at New York.
- Taxation doing business test: This evaluates when a business's activities in New York trigger tax obligations. Courts apply the Commerce Clause principles, as elucidated in *Complete Auto Transit v. Brady*, which outlines a four-pronged approach.
- Qualification doing business test: This focuses on when a business must apply for the authority to do business in New York. If a company engages in any activities in New York beyond those specifically enumerated in Section 1301(b) of the New York Business Corporation Law as not constituting doing business, it becomes necessary to closely examine the company's activities to determine if it must be authorized to do business in the state.
The qualification doing business test can be complex, and there is no definitive list of activities that constitute doing business. However, some examples can provide guidance:
- A foreign manufacturing organization operating in New York qualifies as "doing business" because manufacturing is a substantial part of its regular business.
- Maintaining a small New York office with a mix of full-time and part-time employees, primarily handling requests for space on flights originating outside the U.S., was deemed "doing business" in New York.
- Systematic and continuous solicitation and servicing of New York accounts by a foreign sales agency through on-site representatives constitute "doing business."
- Owning and leasing real estate as an incidental part of another enterprise does not constitute "doing business." However, if a foreign entity's sole purpose is land leasing or acquisition, it qualifies as "doing business" in New York.
- Entering into one or two contracts in New York typically doesn't constitute "doing business."
- Advertising a foreign company in New York newspapers is insufficient, but combining it with an answering service indicates an intent to do business in New York.
It's important to note that the above examples may not cover all possible scenarios, and the determination of whether a business qualifies as "doing business" in New York may depend on various factors and specific circumstances.
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Continuous and systematic solicitation
The New York Department of State does not provide opinions on what activities constitute doing business in the state for qualification purposes. However, case law and certain statutes provide some guidance on this matter.
For instance, Section 1301(b) of the New York Business Corporation Law enumerates activities that are not considered doing business in New York. If a foreign corporation carries on any activities in the state beyond those listed in Section 1301(b), it becomes necessary to examine the specific facts of the case to determine whether the corporation needs to be qualified to do business in New York.
One such case involved a Louisiana company hired by a New York company to conduct and manage a special sale. The Louisiana company provided a sales manager and salespersons to work at the sale over a two- to three-month period, during which they sold merchandise to New York consumers. The Louisiana company also mounted an extensive ad campaign targeting New York consumers. The appellate court upheld the trial court's ruling that the Louisiana corporation was doing business in New York within the meaning of Section 1312(a) and dismissed the plaintiff's complaint.
In general, unless a foreign corporation is engaging in a regular and continuous course of conduct in New York, it is presumed that the corporation does not need to be authorized to do business in the state. However, if a foreign corporation has been conducting business in New York State prior to filing its Application for Authority, it must obtain the consent of the New York State Tax Commission under Section 1304 (a)(8) of the Business Corporation Law.
To become authorized to do business in New York, a foreign corporation must complete and file an Application for Authority with the Department of State, along with a Certificate of Existence from the official who files and maintains corporate records in the jurisdiction of the corporation. The filing fee for this application is $225. If the true name of the corporation is not available for use in New York State, the corporation must designate a fictitious name that does not contain a corporate indicator.
It is important to note that the New York Attorney General may bring an action to restrain a foreign corporation from doing business in the state without authorization. Additionally, a foreign corporation doing business in New York without authority cannot maintain an action in the state unless it becomes authorized and pays all necessary fees, taxes, and related charges.
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Foreign corporations
If a foreign corporation has already been conducting business in New York State prior to filing its application, it must obtain the consent of the New York State Tax Commission. This can be done by calling the commission directly. The completed application, consent, and filing fee should then be forwarded to the NYSDOS.
It is important to note that the NYSDOS does not provide opinions on what activities constitute doing business in New York State for qualification purposes. To determine whether a foreign corporation needs to register, it is recommended to consult a New York business attorney and consider case law on the subject.
If a foreign corporation is authorized to do business in New York, it may engage in any type of business that a domestic corporation may lawfully do, provided it is authorized to do so in its state or country of incorporation. The corporation's name is protected, and it may use New York State courts. However, even if a foreign corporation is not authorized by the NYSDOS, it must still file and pay all state and local taxes if it is subject to tax in New York.
A foreign corporation that no longer wishes to conduct business in New York may surrender its authority. However, this does not annul its obligation to pay back taxes or future taxes if it remains subject to tax in the state.
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Frequently asked questions
The qualification doing business test determines when a business must apply for the authority to do business in New York.
The definition of "doing business" in New York is not precise, but instead, the law offers a non-exhaustive list of activities that do not constitute doing business. For example, occasional or casual corporate presence in New York, without additional substantial activity, doesn't amount to "doing business". However, maintaining an office in New York with multiple full-time employees does.
A foreign corporation doing business in New York without authority cannot maintain an action in the state unless and until it has been authorized to do business and paid all necessary fees, taxes, and related penalty and interest charges.
To obtain authorization, a foreign corporation must complete and file an Application for Authority with the Department of State, along with a Certificate of Existence and a filing fee.
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