Legal Definitions - doing-business statute

A doing-business statute is a state law that specifies what activities an out-of-state company or individual must undertake within that state to be considered "doing business" there. The primary purpose of such a statute is to establish when the state's courts have the legal authority (known as personal jurisdiction) to hear a lawsuit against that nonresident entity. If an out-of-state entity's activities meet the criteria defined by the statute, it may be subject to lawsuits in that state's courts, even if it doesn't have a physical office or headquarters there.

Here are some examples illustrating how a doing-business statute might apply:

• Online Retailer with National Sales: Imagine an online clothing retailer based in Colorado that sells its products exclusively through its website to customers across the United States. A customer in New York purchases a coat from the retailer, but the coat arrives damaged. The New York customer wants to sue the Colorado retailer for a refund and damages.

  New York's doing-business statute would define whether the Colorado retailer's consistent sales to New York residents, even without a physical store or employees in New York, constitute "doing business" within the state. If the statute's criteria are met, a New York court could potentially exercise jurisdiction over the Colorado retailer and hear the customer's lawsuit.

• Remote Consulting Services: Consider a financial consultant based in Massachusetts who regularly provides investment advice and portfolio management services to several clients located in California. All communications and service delivery occur remotely via video calls, email, and secure online portals. One California client alleges that the consultant provided negligent advice, leading to significant financial losses, and wishes to sue the consultant.

  California's doing-business statute would determine if the Massachusetts consultant's ongoing contractual relationships, regular provision of services, and generation of revenue from California clients are sufficient to establish that the consultant is "doing business" in California. If so, a California court could assert jurisdiction over the Massachusetts consultant for the dispute with the California client.

• Out-of-State Manufacturer with Local Sales Representatives: A company that manufactures industrial machinery is headquartered in Ohio. While it has no factories or permanent offices in Pennsylvania, it regularly sends its sales representatives to Pennsylvania to attend trade shows, meet with potential buyers, and solicit orders from businesses there. These representatives spend several weeks each year in Pennsylvania. A Pennsylvania-based distributor claims the Ohio manufacturer breached a supply contract and wants to sue.

  Pennsylvania's doing-business statute would outline whether the Ohio manufacturer's consistent presence of sales representatives and active solicitation of business within Pennsylvania are enough to consider it "doing business" in Pennsylvania. If the statute's conditions are met, a Pennsylvania court could assert jurisdiction over the Ohio company for the dispute with the Pennsylvania distributor.