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Definition
A Certificate of Authority is an official document issued by a state government that permits a business entity formed in one state (a foreign entity) to legally operate in another state. It serves as proof that the business has registered with the appropriate state agency and is authorized to conduct business there.

Why it matters
Obtaining a Certificate of Authority is essential for companies expanding operations across state lines. It ensures compliance with local laws, allows the business to open offices, hire employees, and pay taxes in the new state, and helps avoid penalties or legal issues for operating without authorization.

Example use case
A software company incorporated in Delaware wants to open an office in California. To do so legally, it applies for and receives a Certificate of Authority from the California Secretary of State, allowing it to operate as a foreign entity in that state.