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Jan 25, 2026

SOS vs MSB: Understanding the Difference Between Secretary of State Registration and Money Services Business Registration

If you're building a fintech company, you've probably encountered the initialisms SOS and MSB. You might be wondering how they're related. Both involve registration requirements. Both are essential for compliance. But they serve completely different purposes and are filed with different agencies.

Last updated:

January 26, 2026

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Here's the short version: SOS (Secretary of State) registration establishes your business as a legal entity and authorizes it to operate in a state. MSB (Money Services Business) registration with FinCEN is a federal requirement for companies engaged in money transmission and related financial services. You need both, but they're not substitutes for each other.

Understanding the distinction matters because missing either one creates serious compliance gaps, and the consequences differ dramatically.

⚠️ Key Takeaway

You need BOTH registrations if your business transmits money.

SOS creates your legal business entity
MSB classifies you as a financial institution for AML purposes
MTL (state money transmitter licenses) authorizes you to actually transmit money

These are three separate requirements—none substitutes for the others.

What Is SOS Registration?

Secretary of State registration is the process of legally forming or registering your business with a state government. When you file articles of incorporation (for a corporation) or articles of organization (for an LLC) with the Secretary of State, you're creating a legal entity that can enter contracts, open bank accounts, hire employees, and conduct business.

Every state requires businesses to register with the Secretary of State to operate legally within that state. According to the U.S. Small Business Administration, if your business is an LLC, corporation, partnership, or nonprofit corporation, you'll need to register with the Secretary of State's office in any state where you conduct business activities.

Domestic vs. Foreign Registration

Your "home state" is where you originally form your business—this is called domestic registration. If you later expand to other states, you must file for foreign qualification in each additional state. The term "foreign" simply means out-of-state, not international.

For example, a Delaware corporation that wants to do business in California must register as a foreign corporation with the California Secretary of State. This involves filing a Certificate of Authority and often providing a certificate of good standing from the home state.

What SOS Registration Includes

Secretary of State filings typically require your business name and entity type, principal office address, registered agent information, names of organizers, directors, or managers, and the general purpose of the business.

Once registered, you'll have ongoing obligations including annual or biennial reports, registered agent maintenance, and updating records when key information changes. According to state Secretary of State offices, failure to maintain these filings can result in administrative dissolution of your business entity.

The Certificate of Good Standing

When your business has met all filing requirements and paid all fees, you're considered to be "in good standing." You can obtain a certificate of good standing (also called a certificate of existence or certificate of status depending on the state) as proof. This certificate is frequently required when applying for business licenses, opening bank accounts, seeking financing, or registering in additional states.

What Is MSB Registration?

Money Services Business (MSB) registration is a federal requirement administered by the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. Unlike SOS registration, which establishes your legal existence, MSB registration brings your company into the federal anti-money laundering (AML) regulatory framework.

According to FinCEN, the term "money services business" includes any person doing business in one or more of the following capacities: dealer in foreign exchange, check casher, issuer of traveler's checks or money orders, seller or redeemer of traveler's checks or money orders, money transmitter, or provider or seller of prepaid access.

The Money Transmitter Category

For most fintech companies, the relevant category is money transmitter. FinCEN defines a money transmitter as someone who receives money from one person and transmits it to another. The IRS notes that a person who engages as a business in the transfer of funds is an MSB as a money transmitter, regardless of the amount of money transmission activity.

This is a critical distinction. Other MSB categories (check cashers, currency exchangers) have a $1,000 daily threshold—you only qualify as an MSB if you conduct more than $1,000 in transactions with any single person in a day. But for money transmitters, there is no threshold. Any amount of money transmission activity triggers the registration requirement.

What MSB Registration Requires

MSB registration with FinCEN involves completing FinCEN Form 107 electronically through the BSA E-Filing System. According to FinCEN, the MSB's owner or controlling person must register within 180 days after the date on which the MSB is established, and registration must be renewed every two years.

Beyond registration, MSBs must implement a written anti-money laundering (AML) compliance program, file Currency Transaction Reports (CTRs) for cash transactions over $10,000, file Suspicious Activity Reports (SARs) for suspicious transactions of $2,000 or more, and maintain records of certain transactions. MSBs are subject to the full range of BSA regulatory requirements, including the anti-money laundering program rule, suspicious activity and currency transaction reporting rules, and various other identification and recordkeeping rules.

The Key Differences: SOS vs MSB

Understanding how these two registrations differ is essential for building a compliant fintech operation.

Regulatory Authority

SOS registration falls under state jurisdiction. Each state's Secretary of State (or equivalent agency) handles business entity formation and registration. There are 50 separate state authorities, plus the District of Columbia and U.S. territories.

MSB registration falls under federal jurisdiction. FinCEN, part of the U.S. Treasury Department, is the sole authority. One federal registration covers your entire U.S. operation for MSB purposes.

Purpose and Function

SOS registration establishes your legal existence. It creates the entity that will conduct business, enter contracts, and be subject to taxation. Without SOS registration, your business doesn't legally exist in that state.

MSB registration establishes your regulatory status for federal anti-money laundering obligations. It doesn't create your business; it categorizes your already-existing business as a financial institution subject to Bank Secrecy Act requirements. Without MSB registration, you can't legally operate as a money services business.

Geographic Scope

SOS registration is state-by-state. You need separate registration in your formation state plus every additional state where you conduct business. A company operating in 20 states needs 20 separate state registrations.

MSB registration is nationwide. One FinCEN registration covers all U.S. operations regardless of how many states you serve.

Timeline and Complexity

SOS registration is relatively straightforward. Most states process filings within a few days to a few weeks. The documentation is minimal, typically just basic business information and a filing fee.

MSB registration is similarly straightforward in terms of the filing itself. FinCEN Form 107 can be completed online. However, the compliance infrastructure behind it—developing an AML program, training staff, implementing transaction monitoring—is substantial.

Ongoing Obligations

SOS registration requires annual or biennial reports (depending on the state), maintaining a registered agent, updating filings when information changes, and paying annual fees.

MSB registration requires biennial re-registration with FinCEN, maintaining an effective AML program, filing CTRs and SARs as required, keeping transaction records, and being subject to examination by regulators.

Consequences of Non-Compliance

Failing to maintain SOS registration can result in losing good standing status, inability to obtain certificates required for licensing, administrative dissolution of your business, personal liability exposure for owners, and inability to sue or defend lawsuits in that state.

Failing to register as an MSB or maintain compliance carries more severe consequences. According to FinCEN, civil penalties may be imposed for violation of the registration requirement—up to $5,000 for each day of violation. Criminal prosecution is also possible, and operating an unregistered money services business is a federal crime.

SOS vs MSB: Side-by-Side Comparison

Understanding Secretary of State registration and Money Services Business registration

****Verify FinCEN/state sites for updates

**SOS vs MSB: Side-by-Side Comparison**
Requirement	SOS (Secretary of State)	MSB (Money Services Business)
What It Is	State business entity registration	Federal regulatory classification
Regulatory Authority	Individual state agencies (50 separate authorities)	FinCEN (U.S. Treasury Department)
Primary Purpose	Establishes legal existence of your business	Brings company into federal AML framework
Geographic Scope	State-by-state (separate filing per state)	Nationwide (one registration covers all U.S.)
Number of Filings	1 per state where you operate	1 federal registration total
Filing Method	State-specific forms (many use online portals)	FinCEN Form 107 (electronic via BSA E-Filing)
Initial Filing Fee	$50 – $500+ per state	No fee
Approval Timeline	Days to weeks	Days
Registration Deadline	Before conducting business in that state	Within 180 days of establishing MSB activities
Renewal Frequency	Annual or biennial (varies by state)	Every 2 years
Ongoing Requirements	Annual reports, registered agent, update filings	AML program, CTRs, SARs, recordkeeping
Key Documents Required	Articles of organization/incorporation, registered agent info	Business details, owner/controlling person info
What It Authorizes	Legal existence; ability to contract, sue, operate	Classification as financial institution under BSA
Does NOT Authorize	Money transmission or financial services	Legal entity status or state-level operations
Non-Compliance Penalty	Loss of good standing, administrative dissolution, personal liability	Up to $5,000/day civil penalty, criminal prosecution
Examinations	None (filing registry only)	Subject to IRS/FinCEN examination
Required for MTL?	Yes (must show certificate of good standing)	Yes (must show proof of registration)

How SOS and MSB Work Together

For fintech companies engaged in money transmission both registrations are necessary, but they serve different functions in your compliance architecture.

The Compliance Sequence

Step 1: Form your business entity (SOS). Before you can register as an MSB or apply for state licenses, you need a legal entity. File your articles of organization or incorporation with your chosen formation state.

Step 2: Register in additional states (SOS). If you'll operate in multiple states, file for foreign qualification in each state. You'll need a registered agent in each state.

Step 3: Register as an MSB (FinCEN). Once your entity exists, register with FinCEN within 180 days of establishing your MSB activities. Implement your AML program.

Step 4: Apply for state money transmitter licenses (MTL). This is where everything converges. State regulators typically require proof of SOS registration (through certificates of good standing), proof of FinCEN MSB registration, and a complete application with business plans, financial statements, and compliance documentation.

**The Compliance Sequence**
Step	Registration	Agency	Purpose
1	Form business entity	Secretary of State (home state)	Create legal entity
2	Foreign qualify in other states	Secretary of State (each state)	Authorize multi-state operations
3	Register as MSB	FinCEN	Establish federal AML compliance
4	Apply for MTLs	State banking regulators	Obtain permission to transmit money

The Interdependencies

Your SOS registration status directly affects your ability to obtain and maintain MTLs. If you fall out of good standing with the Secretary of State—perhaps by missing an annual report deadline—you may not be able to renew your money transmitter license or may face regulatory action.

Similarly, your MSB registration is often verified during state licensing examinations. State regulators may coordinate with the IRS and FinCEN to review your BSA/AML compliance as part of their supervision.

Common Misconceptions

"I only need one or the other." Wrong. SOS registration and MSB registration serve completely different purposes. Forming an LLC doesn't register you as an MSB, and registering with FinCEN doesn't create a legal business entity. You need both.

"SOS registration is the same in every state." Not quite. While the general concept is consistent, each state has its own forms, fees, timelines, and ongoing requirements. Annual report due dates, for example, vary widely: some states require calendar-year filings, others use anniversary dates, and some require biennial rather than annual reports.

"MSB registration is the hard part." Actually, the FinCEN registration itself is straightforward: a single online form with basic business information. The challenge is building and maintaining the AML compliance infrastructure that registration obligates you to have.

"Once I'm registered, I'm done." Both registrations have ongoing requirements. SOS registration requires annual reports and maintenance. MSB registration requires biennial renewal, plus continuous compliance with BSA/AML obligations.

"Good standing with the SOS means I'm compliant everywhere." Good standing with your Secretary of State only confirms you've met that state's corporate filing requirements. It says nothing about your federal MSB status, your AML compliance, or your state money transmitter licensing.

Why This Matters for MTL Applications

When you apply for a money transmitter license, state regulators verify both your SOS and MSB status. The licensing checklist typically includes a certificate of good standing from your formation state, certificates from every state where you're registered as a foreign entity, proof of FinCEN MSB registration, and your AML/BSA compliance program documentation.

If any of these elements are missing or deficient, your MTL application stalls. Regulators may issue deficiency letters requesting proof of registration or good standing, adding weeks or months to your timeline.

More critically, letting either registration lapse after you're licensed can jeopardize your MTL. State examiners review corporate compliance during examinations. If they discover you've been administratively dissolved in a state or that your FinCEN registration expired, you face enforcement action.

State-Specific Considerations

Different states have different requirements for both SOS registration and money transmission licensing. If you're targeting specific markets, understanding state-specific nuances is essential.

Quick Reference: Ongoing Obligations

SOS Requirements (Per State)

☐ Annual/biennial report filing

☐ Registered agent maintenance

☐ Update filings for material changes

☐ Annual fees

MSB Requirements (Federal)

☐ Biennial re-registration with FinCEN

☐ Written AML compliance program

☐ Currency Transaction Reports (CTRs) for cash >$10,000

☐ Suspicious Activity Reports (SARs) for suspicious activity >$2,000

☐ Transaction recordkeeping

☐ Agent list maintenance (if applicable)

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Next Steps

If you're building a fintech company that will engage in money transmission, you need to address both SOS and MSB compliance early. Start by forming your business entity in your chosen state, then plan your multi-state registration strategy based on where you'll operate.

Once your entity exists, register with FinCEN as an MSB and begin building your AML compliance program. With these foundations in place, you're ready to pursue state money transmitter licenses.

How Brico Helps

Managing SOS filings across 50 states while maintaining FinCEN registration and pursuing MTLs creates significant operational complexity. Brico's compliance automation platform addresses this challenge by integrating corporate compliance with license management.

Unified compliance tracking. See your SOS registrations, annual report deadlines, good standing status, and MTL requirements in a single dashboard. Never be surprised by a missed filing that jeopardizes your licenses.

Automated deadline management. Annual reports, registered agent renewals, FinCEN re-registration… Brico tracks all deadlines and sends proactive alerts so nothing falls through the cracks.

Certificate management. When MTL applications or renewals require certificates of good standing, Brico helps you track which certificates you need and when they expire.

Regulatory intelligence. State requirements change. Filing deadlines shift. Brico monitors regulatory changes across all jurisdictions and surfaces updates relevant to your compliance obligations.

Companies using Brico maintain compliance more efficiently, reducing the risk of gaps that could delay licensing or trigger enforcement action.

→ Ready to simplify your compliance? Schedule a demo to see how Brico can help.

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Disclaimer: This article is for informational purposes only and does not constitute legal, financial, or regulatory advice. Brico is not a law firm and does not provide legal counsel. Licensing requirements vary by state and depend on your specific business model and circumstances. You should consult with qualified legal counsel before making any licensing decisions or taking action based on this content.

FAQs

What happens if I let my SOS registration lapse?

You may lose good standing status, face administrative dissolution, be unable to obtain required certificates for licensing, and potentially face personal liability. Your money transmitter licenses may also be affected.

How long does each registration take?

SOS registration typically takes a few days to a few weeks depending on the state. MSB registration with FinCEN is usually processed within a few days of electronic filing.

Does SOS registration give me permission to transmit money?

No. SOS registration only establishes your legal existence. To transmit money legally, you also need federal MSB registration and state money transmitter licenses.

Which registration comes first—SOS or MSB?

SOS registration comes first. You must have a legal business entity before you can register that entity as an MSB with FinCEN.

Do I need both SOS registration and MSB registration?

If your business transmits money, yes. SOS registration creates your legal entity; MSB registration brings you into the federal AML regulatory framework. They serve different purposes and are filed with different agencies.

What does SOS stand for in business compliance?

SOS stands for Secretary of State, the state agency responsible for business entity registration. SOS registration creates your legal business entity and authorizes it to operate in a state.

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