Friday, April 20, 2012

Foreign Entities Seeking Contracts with Kentucky Must Qualify to Transact Business

Foreign Entities Seeking State Contracts Must
be Qualified to Transact Business in Kentucky

      The rules for when a particular business organization must qualify to transact business are at best confusing.  See KRS § 14A.9-010.  The statute does not define what is “transacting business,” but only recites activities that of themselves do not constitute transacting business.  Foreign business entities receiving state contracts have often been able to avoid qualification by falling into one of those exemptions from what is transacting business. 

      Under amendments made by 2012 H.B. 341, any foreign business organization, as a prerequisite to receiving a state contract, must be qualified to transaction business in the Commonwealth of Kentucky.  Further, for an entity holding a state contract must maintain its qualification to transact business through the contract’s term. 

       For most business organizations, that qualification will be by means of a certificate of authority, although if the foreign entity is a limited liability partnership it will be by means of a statement of foreign qualification.  Further, for those foreign partnerships that are themselves not limited liability partnerships, they may qualify to transact business, solely for the purpose of qualifying to receive a state contract, by means of a certificate of authority.  Otherwise, it remains the law that a foreign general partnership, not an LLP, not only need not qualify to transact business, but there is no mechanism by which they may do so.  See 2012 H.B. 341, §§ 84, 85, 86 and 87.

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