Corporations engaged in electronic commerce (e-commerce) face challenges when they seek to do business with consumers in another state. The states themselves also face challenges as they try to determine the best way to regulate the corporations. One way in which the states seek to regulate foreign corporations is by requiring them to register and obtain the state's authority to transact business within its borders. Therefore, corporations need to know when they must obtain a state's authority to transact business and when they fall within an exception to a state's registration requirement. This Emerging Issues Commentary surveys the registration requirements of different states that have enacted some version of the Model Business Corporation Act and those that have not and identifies potential circumstances in which states would be likely to exclude an internet-business from having to register. Also discussed is the development of jurisprudence governing what it means to be "do business" in a state through a website.
Excerpt
With the exception of Minnesota, every United States jurisdiction has, through statute or case law, excluded corporations transacting only interstate commerce from the requirement to seek a state's authorization to do business within its borders. And most jurisdictions have also exempted corporations making isolated transactions or operating similar to mail order businesses, where orders placed within the state are filled outside of the state. Most transactions involving internet businesses maintained by foreign corporations are likely to fall into one of those three exceptions. If an internet business is a foreign corporation, then any order fulfillment taking place in another state would fall within the "like mail order" or interstate commerce exceptions unless the corporation has an order fulfillment facility in the state. At that point, it would probably have to acquire a certificate of authority as it would then most likely be considered to be "transacting business" by maintaining operations within the state. Nevertheless, there is a dearth of case law interpreting what it means for an Internet business to be "doing business" in a state for the purposes of determining whether it has violated a statutory obligation to register with a state. In the absence of clear case law on the subject, it would be helpful to review cases that deal with whether an Internet website operator is "doing business" within the context of the well-litigated issue of personal jurisdiction.
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