In many ways, federal government contractors operate under a separate set of rules from other, state-based, local companies.  However, in some respects, state and local governments treat them just like any other business.

For example, every out-of-state (or “foreign”) corporation or limited liability company conducting business in Virginia, Maryland, or the District of Columbia must register with each jurisdiction in which it is conducting business (i.e., at the Virginia State Corporation Commission, Maryland Department of Assessments & Taxation, or the District Department of Consumer and Regulatory Affairs).  In fact, failure to register – while continuing to conduct business – may subject the company to fines and penalties.  For example, in Virginia, an out-of-state company transacting business as a limited liability company that is not actually registered as one at the Virginia State Corporation Commission may be found guilty of a Class 1 misdemeanor for violating the Virginia Limited Liability Company Act. 

Other, more practical “penalties” affect companies that are out of compliance with these laws.  For example, in each local jurisdiction (i.e., Virginia, Maryland, and the District of Columbia), a foreign corporation or limited liability company that is or has been conducting business in the state without registering as a foreign company may not file a lawsuit in state court until it registers with the appropriate agency as a foreign company.     

The lesson here is that if your company is organized in Delaware, Nevada, or any other popular corporate jurisdiction – but is not registered in each of the jurisdictions in which it conducts business – then it must file for permission to conduct business, as a foreign entity, in those other jurisdictions so it will be compliant with state law.