If your limited liability company (LLC) does business in a state other than the one where it was formed, you will almost certainly need to establish a foreign Limited Liability Company (LLC).
What is a Foreign Limited Liability Company (LLC)?
A Foreign Limited Liability Company (LLC), contrary to popular belief, refers to a company based in the United States. It is a classification used for companies that conduct business in states other than the one in which the LLC was formed. States require companies to register as foreign Limited Liability Company LLCs in order to meet regulatory and tax requirements, and the term “foreign” simply means the company was formed in a different state.
When Should You Register as a Foreign LLC?
If you registered your LLC in one state and conduct business in other states, you must register as a foreign Limited Liability Company LLC in each of those states where you do business.
Each state has its own rules regarding what types of business activities qualify you as a foreign business. These rules are usually available on the secretary of state’s website. If any of the following conditions are met, you will be required to register as a foreign Limited Liability Company LLC:
- You have a physical presence in the state, such as offices, warehouses, or retail stores.
- You employ people in the state.
- You meet with managers, investors, or clients in the state on a regular basis.
- The state has granted you a business license.
Other activities that may require registration as a foreign Limited Liability Company LLC include having a bank account or property in the state, such as a fleet of delivery vans.
Just because you do a lot of business in another state doesn’t mean you have to register there. If you have an online surfboard business in New York and the majority of your sales come from California, for example, you probably won’t be required to register your business in California because interstate commerce alone isn’t a criterion. However, if you open a warehouse in California to expedite shipments to your customers, you will almost certainly be required to register as a foreign LLC there.
Forming a new LLC in each state where you want to operate is an alternative to foreign registration. You would have to follow the state’s procedures, but the advantage is that if you are sued or declare bankruptcy at one of your operations, your other operations would not be liable for any debts or liabilities.
How to Register as a Foreign LLC
In most states, applications for foreign registration are handled by the secretary of state’s office, and you should check the state’s requirements.
Depending on the state, the application may be known by different names, such as:
- application for foreign LLC registration
- Registration of a foreign LLC
- certification of authority application
- application for registration
- Foreign LLC registration certificate
- statement of foreign registration
- statement of foreign qualification to conduct activities
- authority certificate, or
- a foreign corporation’s statement and designation
The steps and application are similar to those you took to form your LLC, and they include:
Conduct a name search
Before submitting your application, you should check to see if another company in the state is already using your company name. If your company name is already in use, you must file a Doing Business As (DBA) name, also known as a fictitious business name.
Appoint a registered agent
You will need a registered agent in the new state with an address who can accept legal notices. The registered agent can be someone you pay for this service, or it can be an employee based in the new state if you have a physical location there. However, a registered agent must be available to accept deliveries during normal business hours. If you receive a legal document, even if your registered agent was out of the office or on vacation at the time of delivery, you may be held liable for its contents.
File an application
You must file your completed application and pay a registration fee with the secretary of state’s office or the agency in your state that handles these filings. Fees differ by state, ranging from $50 in Michigan to $750 in Texas.
Some states require you to include a certificate of good standing from the state where your LLC was formed to demonstrate that you are legally authorized to conduct business in your home state. The document is available from the same state office where you registered your LLC. To obtain a certificate, you must be current on all required paperwork, fees, and taxes, as well as pay a small fee.
What Happens If You Don’t Register?
Many states charge hefty fines for operating without proper registration. You would also be barred from filing a lawsuit in that state.