Doing Business

A qualification imposed in state LONG-ARM STATUTES governing the SERVICE OF PROCESS, the method by which a lawsuit is commenced, which requires nonresident corporations to engage in commercial transactions within state borders in order to be subject to the PERSONAL JURISDICTION of state courts.

The DUE PROCESS CLAUSE of the U.S. Constitution, and similar provisions found in state constitutions, guarantees the fair and orderly administration of justice by the courts by providing that any individual, including corporations, must receive notice of the charges against him or her or it and an opportunity to present a defense prior to the rendition of judgment. This clause has been interpreted by courts to require a state to have some tie or relationship to a defendant before its courts acquire the power to bind the individual personally. Employing this reasoning, state legislatures enacted statutory provisions requiring nonresident or foreign corporations to do or transact business within the state if they are to be amenable to the personal jurisdiction of its courts. Doing business is one kind of minimum contact that brings such a corporation within the jurisdiction of the court.

The nature and extent of business to be done within a state varies according to the jurisdiction. It must be an exercise of some of the functions for which the enterprise is incorporated and it must be of a sufficient nature to justify an inference that the corporation is present within the state. If so, the corporation is viewed as having received some benefit of the laws of the state and, therefore, should also be liable for its actions therein. In the past, there had to be a substantial tie to the state, such as the operation of an office or the presence of a resident employee. Today, courts consider this requirement fulfilled by a single commercial transaction, if the cause of action—facts providing a right to a judicial remedy—arises from it. If the CAUSE OF ACTION does not, however, a nonresident corporation is not amenable to service of process unless it has a substantial and regular relationship with the state comparable to the residency of an individual, such as having its corporate headquarters in the forum state. In cases involving subsidiary corporations, the intrastate business engaged in by a subsidiary is sufficient to make its parent corporation amenable to process in the state because the parent corporation is deemed to be doing business in the state.

The laws of each state must be consulted to determine whether a foreign corporation is doing business within a state to make it amenable to process therein.

The phrase doing business is sometimes used in the assessment of local taxes upon a nonresident corporation in jurisdictions other than the place of its incorporation in which it engages in business.