HR / OPERATIONS
" OTHER STATE " SEC. OF STATE REGISTRATIONS
THE“ HIDDEN” REQUIREMENT BEHIND YOUR AGENCY LICENSES written by Wendy Boe, Turris
In today’ s insurance landscape, most agencies and MGAs do business in all states or at least maintain licensing across multiple states. Insurance professionals know they need non-resident licenses to work in these states; however, many don’ t consider the foreign registration requirements for doing business in other states until a licensing issue arises.
More and more states are requiring a foreign Secretary of State registration to obtain and maintain a business insurance license. It is a growing trend. Here is a practical roadmap to understand where foreign registrations are needed, the dangers of skipping this step, and how to build this into your compliance budget and maintain it.
What is a foreign registration and how is it triggered? A“ foreign” state is any state other than where the business entity is domiciled. If your insurance organization is operating in a state other than where it was formed, a foreign registration is likely needed in that state.
Activities considered“ transacting business” under states’ corporate rules vary. Some states may require a foreign registration if there are employees working remotely or if there is a physical office, while most states require registration once revenue is being generated.
Furthermore, some states say that if your only activity in the state is interstate commerce( business that crosses state lines), you don’ t have to foreign-qualify with the Secretary of State. In those states, if an insurance agency or MGA is only operating across state lines and has no in-state presence( no office, employees, or other local activity), there may not be a need to foreign qualify. In the insurance world, this means the organization is limited to mailing and emailing policies, or otherwise servicing policyholders from another state without a physical presence.
It is risky to rely on this interstate commerce exemption because the DOI can still mandate foreign registrations as a condition of issuing or maintaining a producer / agency license, even if the corporate statute would otherwise exempt the entity.
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