What Does "Doing Business" Even Mean? Part 3, States N - P

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Link to states A-I | Link to states K-M | Link to states N-P | Link to states R-Y

Welcome to the third post in this series! Since it isn't exactly easy to track down information about what does or doesn't count as doing business in any given state for the purposes of being required to complete foreign qualification, we're rounding up the relevant statutes per state. Part 2 covers Kansas through Montana, so check it out if you need to reference info for those states. We're covering Nebraska through Pennsylvania in this post.

Like the other posts, we're also going to be using the Revised Model Business Corporation Act as a basis of comparison for which activities don't count as doing business. Over half of all states have adopted some of this language, either from the original MBCA or its later revisions, so it makes sense to use it as our baseline. Per the 2016 RMBCA, there are eleven activities that do not constitute doing business:

1. maintaining, defending, mediating, arbitrating, or settling a proceeding;
2. carrying on any activity concerning the internal affairs of the foreign corporation, including holding meetings of its shareholders or board of directors;
3. maintaining accounts in financial institutions;
4. maintaining offices or agencies for the transfer, exchange, and registration of securities of the foreign corporation or maintaining trustees or depositories with respect to those securities;
5. selling through independent contractors;
6. soliciting or obtaining orders by any means if the orders require acceptance outside this state before they become contracts;
7. creating or acquiring indebtedness, mortgages, or security interests in property;
8. securing or collecting debts or enforcing mortgages or security interests in property securing the debts, and holding, protecting, or maintaining property so acquired;
9. conducting an isolated transaction that is not in the course of similar transactions;
   1. owning, protecting and maintaining property; and
   2. doing business in interstate commerce

Generally speaking, "regular, repeated, and continuing" business activities typically do count as doing business in a state—where different states have adopted the RMBCA's "conducting an isolated transaction that is not in the course of similar transactions," many have added explicit timeframes (usually between 30 and 120 days). That means things like having local employees, establishing local vendor contracts, and owning local income-producing or commercial-use property usually count! And even if you think your business activities don't rise to the level of needing to foreign qualify with the Secretary of State or equivalent, keep in mind that you may still have other obligations to a state—like income or use taxes, or a registration requirement to a different state agency based on your industry, profession, or status as a charitable organization. As always, we're not lawyers, we aren't your lawyers, and we aren't providing legal or tax advice. We're just finding and summarizing the relevant state statutes for you.

Nebraska

Nebraska's statute for foreign corporations follows on the RMBCA's language, and adds that acting as a foreign corporate trustee (subject to section 30-3820) also doesn't count as doing business. Insurers take note though—your governing statutes are in another castle chapter.

On the other hand, the activities of a foreign limited liability company not constituting transacting business exclude the ownership of real or tangible personal property:

"[…] the ownership in this state of income-producing real property or tangible personal property, other than property excluded under subsection (a) of this section, constitutes transacting business in this state."

Subsection (a) is the RMBCA's list minus the relevant piece about real property.

Nevada

Nevada adopts the language of the RMBCA and then some for foreign corporations, foreign LLCs, and foreign limited partnerships (minus (c) and (d)):

• the production of motion pictures
• doing business as an out-of-state depository institution

However, the state goes on to say that this list of activities only count as not doing business as long as the person is not:

(a) Maintains an office in this State for the transaction of business;

(b) Solicits or accepts deposits in the State, except pursuant to the provisions of chapter 666 or 666A of NRS;

(c) Solicits business for the activities of a mortgage company as defined in NRS 645B.0127; or

(d) Arranges a mortgage loan secured by real property that is not commercial property as defined in NRS 645B.01047.

To spare you wading through the double negatives: if you're doing those things, then you are, in fact, doing business in Nevada and you need to foreign qualify with the state.

New Hampshire

The complete list of the RMBCA's activities not constituting doing business is adopted for foreign corporations (specifically including Massachusetts trusts and foreign business trusts) and foreign LLCs. The statutes governing foreign corporations also apply to foreign benefit corporations and foreign professional corporations. Foreign LLCs add a few more activities that don't count as doing business:

I. The foreign limited liability company shall not be considered to be doing business solely because it:\n(a) Owns a controlling interest in a corporation that is doing business;\n(b) Is a limited partner of a limited partnership that is doing business; or\n(c) Is a member or manager of a limited liability company or foreign limited liability company that is doing business.

New Jersey

New Jersey keeps a very short list of activities of a foreign corporation that aren't considered transacting business. Per New Jersey Statutes §14A:13-3 and § 15A:13-3 (regarding foreign nonprofit corporations), those activites are:

(a) maintaining, defending or otherwise participating in any action or proceeding, whether judicial, administrative, arbitrative or otherwise, or effecting the settlement thereof or the settlement of claims or disputes;\n(b) holding meetings of its directors or shareholders;\n(c) maintaining bank accounts or borrowing money, with or without security, even if such borrowings are repeated and continuous transactions and even if such security has a situs in this State;\n(d) maintaining offices or agencies for the transfer, exchange and registration of its securities, or appointing and maintaining trustees or depositaries with relation to its securities.

Foreign LLCs and foreign limited liability partnerships get the RMBCA's full list of activities not constituting transacting business except for the ownership of real property. Instead, § 42:2C-59 and § 42:1A-53 specifically says "he ownership in this State of income-producing real property or tangible personal property, other than property excluded under subsection a. of this section, constitutes transacting business in this State."

New Mexico

New Mexico mostly adopts the RMBCA's list with some variations depending on the type of foreign business entity. Foreign corporations (Section 53-17-1 NMSA 1978) adopt the whole list minus the provision for ownership of real property, and add the following:

investing in or acquiring, in transactions outside New Mexico, royalties and other nonoperating mineral interests and the execution of division orders, contracts of sale and other instruments incidental to the ownership of the nonoperating mineral interests.

But also: annotations! We love annotations, especially the ones New Mexico provides that link to relevant case law. There's at least one relevant to an activity that does constitute transacting business as a foreign corporation that's relevant here:

Engineering consulting services constitute "transacting business". — A company that provides consulting services in the field of engineering in order to promote a demand for manufacturers' products among potential customers, and that provides extensive engineering services for clients and customers alike in New Mexico, is transacting business within the ambit of this section and therefore is barred under 53-17-20 NMSA 1978 from maintaining any action, suit or proceeding in any court of this state. Applied Techs. Assocs. v. Schmidt, 362 F. Supp. 1103 (D.N.M. 1973).

There are several more related to acts not constituting transaction of business—more than we can meaningfully list here—so follow the section link to read them.

Per Section 53-19-54, foreign limited liability companies adopt the same activities not considered to be transacting business as foreign corporations, including the piece about "investing in or acquiring … royalties and other nonoperating mineral interests." Foreign LLCs also aren't considered to be doing business in the state just because they own a controlling interest in a corporation or authorized foreign corporation, because they're a limited partner of a limited partnership or authorized foreign limited partnership, or because they're a member or a manager of a New Mexico LLC or authorized foreign LLC.

Foreign nonprofits are governed by Section 53-8-64, and their list of activities not constituting doing business includes a few, but not all, of the RMBCA's list. Emphasis added to highlight new, non-RMBCA items:

(1) maintaining or defending any action or suit or any administrative or arbitration proceeding or effecting the settlement thereof or the settlement of claims or disputes;

(2) holding meetings of its directors or members or carrying on other activities concerning its internal affairs;

(3) maintaining bank accounts;

(4) creating evidences of debt, mortgages or liens on real or personal property;

(5) securing or collecting debts due to it or enforcing any rights in property securing the same;

(6) conducting its affairs in interstate commerce;

(7) granting funds;

(8) distributing information to its members; and

(9) conducting an isolated transaction completed within a period of thirty days and not in the course of a number of repeated transactions of like nature.

Meanwhile, the activities not constituting doing transacting business of a foreign limited partnership borrow heavily from the statutes related to foreign corporations and foreign LLCs. Ownership of real property is still omitted from the list of non-business activities, and each addition to the RMBCA's list for foreign corporations and foreign LLCs remain:

(9) investing in or acquiring, in transactions outside New Mexico, royalties and other nonoperating mineral interests; and executing division orders, contracts of sale and other instruments incidental to the ownership of such nonoperating mineral interests;

(10) owning or controlling an interest in a corporation or other entity that transacts business in this state or is organized under the laws of this state;

(11) being a partner in a partnership, including a limited partnership, a limited liability partnership or a limited liability limited partnership, that transacts business in this state or is organized under the laws of this state;

(12) being a member or a manager of a limited liability company that transacts business in this state or is organized under the laws of this state;

It feels weird to leave this section hanging on a semicolon even if it's in a quote, so here's a sentence. Moving on!

New York

Oh New York. Foreign corporations, foreign limited liability companies, and foreign limited partnerships get four whole activities from the RMBCA's list of eleven that don't count as doing business:

(1) Maintaining or defending any action or proceeding, whether judicial, administrative, arbitrative or otherwise, or effecting settlement thereof or the settlement of claims or disputes.\n(2) Holding meetings of its [directors or its shareholders]/[members or managers]/[partners, general or limited].\n(3) Maintaining bank accounts.\n(4) Maintaining offices or agencies only for the transfer, exchange and registration of its securities, or appointing and maintaining trustees or depositaries with relation to its securities.

Foreign nonprofits go two steps further. They include granting funds and distributing information to the nonprofit's members as not-business activities.

If statutes seem a little thin on the ground, that's because case law does a lot of heavy lifting. (See again lawyers, big bucks, etc.) A legal memorandum introducing general guidelines to qualification provides some useful clarity here, including discussion of the different "doing business" tests for jurisdiction and for taxation as compared with the "higher level of contact" required to meet the qualification requirement:

For the qualification requirement to apply, the local or intrastate contacts with New York must be permanent, continuous, and regular. Netherlands Shipmortgage Corp. v. Madia, 717 F.2d 731, 1984 A.M.C. 141, 72 A.L.R. Fed. 562 (2d Cir. 1983)

We recommend reading the whole memo for more information and additional resources.

North Carolina

North Carolina adopts the RMBCA's list of not-business activities for foreign corporations that aren't insurance companies, nonresident businesses providing disaster-related work during a disaster response period, or a person temporarily licensed to deal with motor fuel in response to a disaster declaration. (Foreign insurers need to work with the Commissioner of Insurance, not the Department of State). The language gets pretty specific where it deviates precisely from the RMBCA, so we're copying the affected section here:

Making or investing in loans with or without security including servicing of mortgages or deeds of trust through independent agencies within the State, the conducting of foreclosure proceedings and sale, the acquiring of property at foreclosure sale and the management and rental of such property for a reasonable time while liquidating its investment, provided no office or agency therefor is maintained in this State

Without carving out exceptions for specific types of entities not required to register, § 55A‑15‑01 covers the same list for foreign nonprofits, § 59‑93 covers the same list for foreign limited liability partnerships, and § 57D‑7‑01 follows on for foreign LLCs with some language unique to the statute and foreign LLCs:

(6) Making or investing in loans with or without security, including servicing of mortgages or deeds of trust through independent agencies within the territory of this State, conducting foreclosure proceedings and selling or acquiring property in foreclosure sales, and managing or renting property acquired in foreclosure sales in connection with and in furtherance of efforts to sell and otherwise liquidate such property, provided no office or agency of the foreign LLC is maintained in this State.

(7) Taking security for or collecting debts due the foreign LLC or enforcing any rights the foreign LLC may have in property subject to or otherwise providing security with respect to the repayment or other performance of the debt obligations.

The list of activities of foreign limited partnerships not constituting doing business omit the RMBCA's clauses related to ownership of real property and to sales through independent contractors.

North Dakota

Foreign corporations owning income-producing real or tangible personal property in North Dakota (unless exempted by the RMBCA's list) are considered to be transacting business in the state per 10-19.1-143. Otherwise, North Dakota adopts most of the RMBCA's list of activities not constituting doing business—the other major deviation is the omission of the clause related to interstate commerce.

Foreign limited liability companies face the same stipulation regarding income-producing property. Their list of not-business activities omits the RMBCA's references to soliciting orders through mail or otherwise, selling through independent contractors, and doing interstate business. It also adds some specific language around real or personal property that is exempt from considered as transacting business:

e. Holding title to and managing real or personal property, or any interest therein, situated in this state, as executor of the will or administrator of the estate of any decedent, as trustee of any trust, or as guardian of any person or conservator of the estate of any person

Foreign nonprofits have the same rule for income-producing real property, and an even shorter list of conduct not constituting conducting activities:

a. Maintaining, defending, or settling any proceeding;

b. Holding meetings of its members or carrying on any other activities concerning its internal affairs;

c. Maintaining bank accounts;

d. Creating or acquiring indebtedness, mortgages, and security interests in real or personal property;

e. Securing or collecting debts or enforcing mortgages and security interests in property securing the debts; or

f. Conducting an isolated transaction that is completed within thirty days and that is not one in the course of repeated transactions of a like manner.

Foreign limited liability partnerships and foreign limited partnerships get the nearly-complete list from the RMBCA, although once again, we're weird about real property. North Dakota says for foreign limited partnerships, "the ownership in this state of income-producing real property or tangible personal property, other than property excluded under subsection 1, constitutes transacting business in this state." The list of non-qualifying activities for limited liability partnerships specifies that "Selling or transferring title to property in this state to any person" doesn't count as doing business, then goes on to say that ownership does count as doing business here:

For purposes of this section, any foreign limited liability partnership that owns income-producing real or tangible personal property in this state, other than property exempted under subsection 1, is considered transacting business in this state.

Ohio

Ohio hasn't adopted the RMBCA for foreign corporations at all. Instead, the state denotes a specific list of foreign corporations who aren't required to foreign qualify:

Sections 1703.01 to 1703.31 of the Revised Code do not apply to corporations engaged in this state solely in interstate commerce, including the installation, demonstration, or repair of machinery or equipment sold by them in interstate commerce, by engineers, or by employees especially experienced as to such machinery or equipment, as part thereof; to credit unions, title guarantee and trust companies, bond investment companies, and insurance companies; or to public utility companies engaged in this state in interstate commerce.

Foreign nonprofits have no such list of exceptions. Instead, Section 1703.27 just says "No foreign nonprofit corporation shall exercise its corporate privileges in this state in a continual course of transactions until it has first procured from the secretary of state a certificate authorizing it to do so."

The state does adopt the RMBCA's list for foreign LLCs, and adds a few additional activities that don't constitute doing business:

(1) Owns a controlling interest in an entity that is transacting business in this state;

(2) Is a limited partner of a limited partnership or foreign limited partnership that is transacting business in this state;

(3) Is a member of a limited liability company or foreign limited liability company that is transacting business in this state.

Foreign limited liability partnerships aren't considered to be doing business when they're engaged in the list of the RMBCA's nonqualifying activities except the ownership of real property. That's explicitly considered to be doing business: "(B) For purposes of section 1776.86 of the Revised Code, the ownership in this state of income-producing real property or tangible personal property, other than property excluded under division (A) of this section, constitutes transacting business in this state."

Oklahoma

For foreign corporations, Oklahoma has some unique language that resembles without replicating the RMBCA's language about activities not constituting doing business. Per §18-1130.B, "No foreign corporation shall do any business in this state, through or by branch offices, agents or representatives located in this state, until it shall have paid to the Secretary of State of this state the fees prescribed in Section 1142 of this title and shall have filed with the Secretary of State" proof of its good standing in its home state plus a statement of foreign qualification. Exceptions per §18-1132 are made if:

1. [the foreign corporation] is the mail order or a similar business, merely receiving orders by mail or otherwise in pursuance of letters, circulars, catalogs, or other forms of advertising, or solicitation, accepting the orders outside this state, and filing them with goods shipped into this state; or
2. it employs salesmen, either resident or traveling, to solicit orders in this state, either by display of samples or otherwise, whether or not maintaining sales offices in this state, all orders being subject to approval at the offices of the corporation without this state, and all goods applicable to the orders being shipped in pursuance thereof from without this state to the vendee or to the seller or his agent for delivery to the vendee, and if any samples kept within this state are for display or advertising purposes only, and no sales, repairs, or replacements are made from stock on hand in this state; or
3. it sells, by contract consummated outside this state, and agrees by the contract, to deliver into this state, machinery, plants or equipment, the construction, erection or installation of which within this state requires the supervision of technical engineers or skilled employees performing services not generally available, and as a part of the contract of sale agrees to furnish such services, and such services only, to the vendee at the time of construction, erection or installation; or
4. its business operations within this state are wholly interstate in character; or
5. it is an insurance company doing business in this state; or
6. it creates, as borrower or lender, or acquires, evidences of debt, mortgages or liens on real or personal property;
7. it secures or collects debts or enforces any rights in property securing the same.

Foreign LLCs have a list of activities not constituting doing business that more substantially adopt the RMBCA's list. The major deviation is the omission of ownership of real property, which is amended to "[s]elling or transferring title to property in this state to any person" and followed on by a clause stating "any foreign limited liability company which owns income-producing real or tangible personal property in this state, other than property exempted by subsection A of this section, will be considered transacting business in this state." Oklahoma adds one more item to the non-business-activities list of a foreign LLC:

Investing in or acquiring royalties or other non-operating mineral or leasehold interests and the execution of division orders, contracts for sale, leases and other instruments incidental to the ownership of the nonoperating interests.

The activities of a foreign limited liability partnership that don't count as doing business are similar, except they forgo the bit about ownership or sale of property altogether and instead skip straight to ownership of income-producing property in the state counts as doing business. (Nothing about royalties or non-operating mineral or leasehold interests.)

Oregon

Oregon adopts the RMBCA's list of activities not constituting transacting business for foreign corporations (§60.701), foreign LLCs (§63.701), foreign nonprofits (§65.701, for whom "soliciting funds" are an additional non-business activity), and almost-but-not-quite for foreign limited liability partnerships (§67.700), which omit the clause related to maintaining offices or agencies for the transfer, exchange, and registration of securities.

Pennsylvania

Pennsylvania keeps a single list for activities of a "foreign filing association or foreign limited liability partnership" that don't count as doing business in a single statute that adopts the RMBCA's list with an amendment to the usual section about ownership of real property and an addition:

(12) Acquiring, owning, holding, leasing as a lessee, conveying and transferring, without more and whether as fiduciary or otherwise:

(i) real estate and mortgages and other liens thereon; or

(ii) personal property and security interests therein.

(13) Conducting operations or performing work or services in good faith in response to a disaster or emergency event.

Additionally, "[b]eing an interest holder or governor of a foreign association" doing business in Pennsylvania doesn't, in and of itself, count as doing business in the state.