Before a foreign corporation qualifies to do business, which statement is true about its ability to sue or be sued in the state?

Before a foreign corporation qualifies to do business, which statement is true about its ability to sue or be sued in the state?

• A. It may sue but may not be sued
• B. It may be sued but may not sue
• C. It may neither sue nor be sued
• D. It may sue and be sued

Answer: (B)

When a foreign corporation hasn’t qualified to do business in a state, it can still be hauled into that state's courts as a defendant, but it cannot initiate lawsuits there yet. The state's jurisdiction over the corporation arises for purposes of defending against claims because the corporation has activities or presence in the state, and service of process can be directed to it. However, the rule requires the corporation to obtain authorization before it may sue in that state’s courts. So the correct idea is that the unqualified foreign corporation may be sued but may not sue in the state.

When a foreign corporation hasn’t qualified to do business in a state, it can still be hauled into that state's courts as a defendant, but it cannot initiate lawsuits there yet. The state's jurisdiction over the corporation arises for purposes of defending against claims because the corporation has activities or presence in the state, and service of process can be directed to it. However, the rule requires the corporation to obtain authorization before it may sue in that state’s courts. So the correct idea is that the unqualified foreign corporation may be sued but may not sue in the state.