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Florida LLC Foreign Qualification: Here’s What to do

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 Florida, you may need to complete a foreign qualification in Florida before you can expand there.

 

What happens if I fail to foreign qualify before doing business in Florida?

Foreign qualifying is essentially asking permission to do business in the state of Florida. And the notion that “it’s easier to ask forgiveness than permission” doesn’t apply here. Failing to foreign qualify before starting a business in Florida yields consequences that are far costlier than registering in the first place. If you fail to foreign qualify, your business:

  • Cannot maintain any action or proceeding in a Florida court
  • Can have a current legal proceeding stayed by a Florida court
  • Will owe the state all fees and penalties it would have paid during its time doing business in Florida had it been properly registered.
  • Will be charged an additional $500-$1,000 civil penalty for each year (or part thereof) it transacted business in Florida without authorization

Let’s add up those penalties. Consider this: you started doing business in Florida in 2015 but didn’t foreign qualify until 2018. For each of those four years (2015, 2016, 2017, and 2018) you could owe $1,000. Then, there are four years of missing annual reports at $138.75 each, plus a $400 late fee each. Tack on the foreign qualification filing fee of $100 and registered agent fee of $25. And your total is (drum roll please): $6,280. That’s a pretty significant penalty. In the end, it’s simply not worth the risk.

The good news is that if you’re caught doing business without foreign qualifying, it won’t invalidate your current contacts in the state or prevent your LLC from defending a proceeding in Florida court.

Find more information on possible penalties in the Florida Revised LLC Act, Sec. 605.0904.

 

What is considered “doing business” in Florida?

We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Florida? The state’s LLC Act gives little direction on this topic as it applies to foreign LLCs. But the Florida Department of Revenue sheds a little light on the subject. According to the D.O.R., you are considered to be “doing business” in Florida and required to foreign qualify if:

  • Maintain an office or other places of business (like stores or warehouses) in Florida
  • You have employees, agents, or other representatives doing business on behalf of your LLC in Florida
  • Assemble, install, or repair products in Florida
  • Deliver goods to Florida customers using a company-owned truck

Depending on have you’ve chosen to set up your LLC, it may also be subject to certain state business taxes. In these cases, foreign qualification lets the state know that you’ll be filing for these. Otherwise, you might be penalized for them later. See this page on the D.O.R. website for more information on Florida’s corporate taxes.

If you’re unsure whether or not you need to file for foreign qualification in Florida, we suggest seeking legal counsel.

 

Could I be exempt from foreign qualifying in Florida?

The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Florida. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:

  • Maintaining, settling, or defending any proceeding in Florida courts
  • Holding manager or shareholder meetings, or similar internal affairs-related actions
  • Maintaining bank accounts
  • Transferring or exchanging the LLCs own securities
  • Selling products or services through independent contractors.
  • Soliciting and/or obtaining orders that take place outside the state before becoming contracts
  • Creating, acquiring, or securing debts
  • Transacting business in interstate commerce
  • A single, isolated transaction, completed within 30 days, that isn’t part of a series
  • Owning real or personal property in Florida
  • Controlling a subsidiary company operating in Florida

If your only business activities in Florida appear on this list, you’re most likely in the clear. Although, it’s wise to read over the full list of exemptions found in Florida’s LLC Act, Sec. 605.0905, and if you have any questions, seek legal advice.

 

How to Foreign Qualify your LLC in Florida

Foreign qualification in Florida 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 Florida, you will need to file the “Application by Foreign LLC for Authorization to Transact Business in Florida.” While the title lacks brevity, the form itself doesn’t. It only requires the following info:

  • Your LLC name (or an alternate name if yours is unavailable)
  • Jurisdiction, or the state where the LLC was formed
  • Date you will begin transacting business in Florida
  • Your LLC office address (and mailing address, if different)
  • Your Florida registered agent’s name, address, and signature
  • Names and addresses of 1-2 LLC managers

Additionally, you’ll need to attach a Certificate of Existence from the state in which your LLC was formed. It should be no more than 90 days old. Contact the appropriate state government to request one.

The Department of State doesn’t offer an online submission option for this form, so you’ll need to mail it, along with your Certificate of Existence and cover letter (included on the form), to:

Division of Corporations

Registration Section

P.O. Box 6327

Tallahassee, Florida, 32314

Live near Tallahassee? If you’re out on the town and want to drop your documents off in person, you can do so at:

Division of Corporations

Registration Section

Clifton Building

2661 Executive Center Circle

Tallahassee, Florida 32301

Don’t forget to pay! Foreign qualification comes with a $125 fee. You can only pay via check, made out to “Florida Department of State.”

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 on its way to foreign qualification and you’re embarking on another chapter in the life of your business.

 

Name Requirements to Remember

Since each state has its own naming guidelines, it’s important to check before you register your LLC. While some requirements are similar across the board, this isn’t always the case. In Florida, your LLC name must:

  • Be distinguishable from all business entities on record with the Department of State
  • Contain the terms “Limited Liability Company,” “LLC,” or “L.L.C.

Check to see if your name is available by searching for it in the Division of Corporations records. See here for guidelines on name distinguishability.

 

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 Florida 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 Florida. For a $100 service fee, they’ll handle that paperwork so you don’t have to.