MBE Rules · Business Associations
Foreign Corporations
Cal. Corp. Code § 2105
The rule
A foreign corporation transacting intrastate business must qualify with the Secretary of State; unqualified corporations cannot maintain actions on intrastate business until qualified and penalized, though contracts remain valid.
In plain English
A foreign corporation is one that is incorporated outside of the state where it is doing business. If it wants to conduct business within a state, it must register with the Secretary of State; otherwise, it cannot sue in that state for business-related issues, although any contracts it entered into remain valid.
Worked example
Company X, incorporated in State A, starts operating in State B without registering. When it tries to sue a local supplier in State B for breach of contract, the court dismisses the case because Company X is unqualified to do business in State B. However, the contract itself is still enforceable.
Memory hook
No registration, no lawsuit: foreign corporations must qualify to play.
The trap
Exams may present scenarios where a foreign corporation attempts to enforce a contract without qualifying, leading students to overlook the qualification requirement.
How examiners test it
Questions often involve a foreign corporation's attempts to sue in a state where it has not registered, testing the candidate's understanding of the qualification requirement and its implications.
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