Domestic corporation

A foreign corporation is a term used in the United States for an existing corporation that is registered to do business in a state or jurisdiction other than where it was originally incorporated. A foreign corporation is one incorporated as a domestic corporation in one state of the United States, authorized to do business in additional state(s); the term is also applied to a corporation incorporated outside the United States which is authorized to do business in one or more states of the United States.

To a degree, the same rules apply with respect to a Limited Liability Company (LLC), in that it is a domestic LLC in the state where it is originally chartered, and a foreign LLC everywhere else.

For U.S. federal tax purposes, "foreign corporation" means a corporation which is not created or organized in the United States.

The United States does not, except for corporations chartered by act of Congress, have federally chartered corporations. (There are special rules for a federal charter for a bank, but while the bank is federally chartered, it is still incorporated in a specific state.) Note that a corporation chartered in Washington, D.C. is not the same as one that is federally chartered; a corporation which is incorporated in Washington, D.C. is for all intents and purposes the same as one incorporated in any of the 50 states; it is a domestic corporation there and a foreign corporation anywhere else.

The use of foreign corporation registration allows a corporation to operate in multiple jurisdictions as the same organization in all of them. The only alternative would be to register a separate corporation in each jurisdiction, and separate every operation according to the particular jurisdiction to which the operations are taking place. This would mean, for example, a corporation operating in 5 U.S. states would have to have separate domestic corporations in each of the five states, as opposed to having a single corporation registered in one state, and being registered as a foreign corporation in the other four.

For example, many public corporations in the United States are registered in the State of Delaware (because of more favorable corporate governance regulations), or registered in Nevada (because of more favorable tax provisions, privacy and corporate officer liability protection) and then are registered as foreign corporations in all the other states that they do business in. Thus the corporation is a domestic corporation in Delaware or Nevada, and is a foreign corporation in any other state (or country) with which it registers. There may be tax benefits as a result of choosing where a corporation's domestic jurisdiction is located. For example, Texas and Nevada have no state income tax. While Delaware does not have income tax, it does have a substantial corporate privilege tax.

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