Many people don’t realize that licensing your agency is only half of compliance; you may also need to complete business registrations in non-resident states. These registrations provide the states with information about the type of business your agency transacts, your business structure and leadership, and your ownership. State regulators review this information to ensure that your business complies with their state’s laws regarding business structure and governance.
Many of our clients protest, “I asked the Department of Insurance about licensing requirements. No one there mentioned a business registration.”
This is likely true because the Department of Insurance does not issue business registrations. The state’s Secretary of State Office and/or Department of Revenue oversee this area. It’s also true that only a handful of states require proof of registration before they will issue an agency license. But most states still want you to complete the registration process. Your legal counsel can advise you if your business is exempt from registration requirements in a particular state.
Secretary of State Office (SOS)
The majority of states require businesses to register with their Secretary of State’s Office. This holds true even if a business doesn’t have employees present in the state or an office there. If you solicit, negotiate, contract, sell or receive commissions from business transaction in a particular state, you need to register there. You may also need to file an initial Annual and/or Biennial Return. ILSA’s Corporate Compliance experts provide the proper forms for your business structure and file initial returns in all non-resident states that require them. We also file in select domicile states.
Once the SOS approves your registration and issues a Certificate of Authority, you become subject to additional compliance requirements, including Annual and/or Biennial Returns.
In the past, many Secretary of State Offices did not actively pursue non-registered businesses. Improvements in technology and increased communication between state offices, however, mean an increasing number of investigations in recent years. If a state determines that you have transacted business without a business registration, they can assess fines for each transaction. They can also assess late penalties going back to the first transaction ever completed there.
If you previously registered in a state but are no longer in good standing, ILSA can help you catch up with past-due annual returns and restore your “good standing.”
Department of Revenue (DOR)
Most states automatically create a tax account for your business when you register with their Secretary of State Office. In a handful of states, however, businesses must file a separate business registration with the Department of Revenue. Your business’ structure plays a key role in determining whether you need a DOR registration. It also affects what forms need to be file and what supporting documentation must be provided. This may include initial Foreign Corporation Tax or Corporate Franchise Tax filings.
If you use a third-party provider, such as ILSA, to manage your initial registration or your ongoing tax filings, you may need to provide a limited Power of Attorney. This form authorizes the provider to access your tax account information.
Name Approval and DBA Registration
Just as some Departments of Insurance have specific requirements for what names an insurance agency uses, the Secretary of State’s Office may prohibit — or insist upon — certain name structures for your business. At the minimum, your business’ name must be sufficiently distinctive from those of other businesses already doing business in the state. ILSA can research your preferred name in the various states to determine if it is available … before you spend a lot of money establishing your brand.
If you plan to transact business under any name other than the one that appears on your Articles of Incorporation/Formation, you must also file a “Doing Business As” Registration (DBA) with the Secretary of State. Some states refer to this as a Fictitious Name, Assumed Name or Trade Name. The DBA must be filed in your domicile state as well as all non-resident states. In some states, you must also register the DBA at the county level.
It’s Not Just for Insurance Agencies
ILSA remains committed to serving the insurance and financial services industries. But insurance agencies aren’t the ones who may need help with business registrations. We offer our wide range of corporate compliance solutions to businesses from all economic sectors. This includes not-for-profit organizations that often have less experience dealing with regulators and addressing their compliance needs.