Your business is growing, and you’re planning an expansion to other states. It’s a good problem to have!
But it’s not quite as simple as choosing another location. Because each state has different rules and requirements for business operations, you may need a “foreign qualification” in each state you plan to do business.
It’s a common misconception that foreign qualification is only for businesses operating outside the U.S. But in this case, “foreign” refers to any business operating in a state that isn’t the state where the LLC was originally formed.
For example, if your LLC is registered in Washington and you are looking to open a second location in Alaska, you may need to complete a foreign qualification in Alaska before you can expand there.
Important Note: If you’d like to save time and have the foreign qualification paperwork taken care of for you, look into a reliable online service like Northwest Registered Agent.
What happens if I fail to foreign qualify before doing business in Alaska?
Foreign qualifying is essentially asking permission to do business in the state of Alaska. And the notion that “it’s easier to ask forgiveness than permission” doesn’t apply here. Failing to foreign qualify before starting business in Alaska yields consequences that are far costlier than registering in the first place. If you fail to foreign qualify, your business:
- Cannot maintain an action, lawsuit, or proceeding in a Alaska court.
- Will be liable for all fees and taxes that the LLC would have been responsible for from the time it formed until the present
- Can be subject to civil penalties of up to $10,000 per calendar year it has been transacting business without foreign qualification
- Can be stopped by the state from doing business in Alaska
If you are caught operating without foreign qualification in Alaska, the good news is that it won’t invalidate your current LLC contracts or prevent your LLC from defending a lawsuit in the state. But the potential price tag of $10,000 per year should be enough to dissuade any business owner from trying to fly under the radar. That’s a huge hit to your budget.
You can read more about possible penalties on the Alaska Corporations Statutes section 10.50.700 and 10.50.710.
What is considered “doing business” in Alaska?
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Alaska? The state’s Corporations Statutes do not specify what exactly constitutes transacting business. However, the Department of Commerce, Community, and Economic Development website states that doing business generally includes:
- Sales or salespeople in the state
- Payroll for employees in the state
- Real or personal property (e.g. offices, warehouses, stores, etc.) in the state
Take note of the warning in the second paragraph: it’s your responsibility to determine if your LLC needs to foreign qualify, not the state’s. If you’re unsure whether or not you need to file for foreign qualification in Alaska, we suggest seeking legal counsel.
Could I be exempt from foreign qualifying in Alaska?
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Alaska. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some common examples are:
- Maintaining, defending, or settling a legal action or suit
- Holding meetings for directors, board members, shareholders, etc. or other internal affairs activities
- Maintaining bank accounts
- Holding an office or agency for the transfer, exchange, and/or registration of securities
- Using independent contractors to make sales
- Securing and collecting certain debts.
- Transacting business in interstate commerce
- A single, isolated transaction within 30 days (one that does not fall into a number of similar, repeated transactions)
Take a look at the full list of exemptions in section 10.50.720 of the Alaska Corporations Statutes. If you find that your LLC’s only business activities are on the list, you’re likely off the hook. But once again, if you’re unsure, it’s better to seek legal counsel than to risk the penalties.
How to Foreign Qualify your LLC in Alaska
Foreign qualification in Alaska is simple if you know where to find and send your forms. If you or your legal counsel has decided to foreign qualify your LLC in Alaska, you’ll need to file a Certificate of Registration with the state. You can find this document on the “Forms & Fees” page by selecting the “Limited Liability Company,” then “Foreign (Non-Alaskan)” dropdown boxes. You’ll also find an option to file online, which is the quickest and easiest way to go about it. Just click the computer icon next to the form and follow the on-screen instructions.
To file by mail, print and complete the form. Then send it, along with your filing fee, to:
State of Alaska Division of Corporations, Business and Professional Licensing
PO Box 110806
Juneau, AK 99811-0806
The Certificate of Registration for foreign entities, found here, includes detailed instructions on how to gather the necessary information for its completion. Standard processing time is 10-15 days after your complete and correct application has been received.
Whether filing online or by mail, foreign qualification requires a $350 application fee, along with any late fees that you may have accumulated. For mailed applications, the state accepts payment by check or any major credit card (you can include your card info on the form). But if you’re filing online, you can only use a Visa or Mastercard.
After your form is in and your fee is paid, sit back, take a deep breath, and pat yourself on the back. Your LLC is foreign qualified and you’re embarking on another chapter in the life of your business.
Name Requirements to Remember
With the paperwork, fees, and rules top of mind, it’s easy to forget about Alaska’s business name requirements, but they’re important! Here’s a quick rundown. Your LLC name must:
- Contain a term of organization that identifies it as an LLC (like Ltd. or LLC)
- Not imply that it is a governmental unit like a city, village, or borough
- Be available and distinguishable in the Alaska state records from the name of other registered or reserved business entities. The Alaska Division of Corporations, Business, and Professional Licensing has a useful guide on what make a name “distinguishable.”
Need to save time?
Let’s face it, there’s never enough time in the day, especially when you’re running a company. And properly registering your LLC in Alaska involves research and time, time that you could be using to continue growing your business.
If the thought of paperwork, fees and state correspondence makes your head spin, consider using a service like Northwest Registered Agent to foreign qualify your business. Services like Northwest ensure that your forms are filed correctly and on-time, potentially saving you thousands of dollars in penalties, not to mention a bunch of time and stress.
And as a bonus, they include a free registered agent service for one year to keep your business compliant and in good standing with the state of Alaska. For a $100 service fee, they’ll handle that paperwork so you don’t have to.