Your limited liability company (LLC) is making moves, venturing out from its home state and expanding into others. No doubt you’re excited to take on this new challenge, but before you get ahead of yourself, take a moment to learn each state’s requirements.
Out-of-state businesses have to abide by a different set of rules than domestic LLCs, and understanding how they differ is the key to remaining compliant in any state where your LLC operates. Whether you just have a few clients in another state or you’re taking your business coast to coast, you will need to foreign qualify your business in each state it enters.
Keep reading for an overview of your responsibilities as a foreign LLC, and check out our state-by-state guides for detailed instructions on how to foreign qualify anywhere your business expands.
What Is a Foreign LLC?
Let’s say you formed an LLC that sells custom dog sweaters in Nevada two years ago and now business is booming, so you’d like to sell your products in California as well. There, it would be considered a “foreign LLC,” which just means that it originated in another state.
But the difference between domestic and foreign LLCs is more than semantics. Foreign LLCs must meet certain conditions before doing business in each new state.
At the very least, you’ll need to acquire a foreign qualification in any state that your LLC establishes a physical presence. This could be a retail store, warehouse, office, etc., but it could also mean selling products, opening bank accounts, hiring in-state salespeople, and more. Essentially, a foreign qualification is the state’s permission to conduct business activities there, and you’ll need to obtain it before doing any in-state business.
What Are the Repercussions for NOT Registering a Foreign LLC?
You can admit it. The thought may have crossed your mind: foreign qualification seems like a hassle, will anyone know if I just do business without it? Some businesses do try to fly under the radar, but it doesn’t often work and carries a pretty big risk because every state has serious penalties for doing so.
Although these penalties vary from state to state, there are a few that recur pretty frequently. If you’re caught doing business without foreign qualification, there’s a chance the state will:
- Allow every company you work with to void any contract they’ve signed.
- Disallow you from filing a lawsuit against any individuals or business entities, making it impossible to defend yourself if someone decides not to honor a contract with your business.
- Impose fines that far exceed what you would have paid to foreign qualify in the first place.
- Take away your limited liability protection, allowing creditors to pursue your personal assets in the case of a lawsuit.
And these are just the most common penalties. Certain states will dish out even more. Make it easy on yourself and foreign qualify right away. Then, you won’t have to worry about keeping your business activities under wraps or incurring any severe penalties.
How Do I File for a Foreign LLC?
Foreign qualifying your LLC is going to be quite a bit different from when you first registered. Instead of an Articles of Organization, you’ll file a separate form, often called the Certificate of Authority or Certificate of Registration, with the Secretary of State.
Most states also require a certified copy of the Articles of Organization or a Certificate of Good Standing from your home state. This is to confirm that your business is valid and well-maintained in its primary state. Once you’re ready to file the correct documents for your state, you will also need to pay some sort of filing fee. In general, foreign LLC fees are slightly higher than those for domestic ones.
Usually, the foreign qualification form itself requires the same type of information you needed for your Articles of Organization. It varies between states, but you can typically expect to provide your LLC’s name and address, the date of formation, its home state, plus the name and address of its registered agent.
Should I Hire Someone to File My Foreign LLC?
Considering all the work that goes into expanding your business to a new state, you’ve likely got a lot on your plate. And if your LLC is headed to multiple new states, there’s a lot of unique filing requirements to remember. Rather than trying to juggle everything yourself, you can bring on an individual or company to help you secure your LLC’s foreign qualification.
For example, business attorneys understand all the legal nuances involved, providing peace of mind that the job will get done correctly. But if you go this route, be sure you have the budget for it. Lawyer fees for foreign LLC qualification can be a prohibitively expensive option for businesses operating on tight budgets.
If you’re operating on a limited budget, but still want to have your foreign LLC professionally formed, go with an online business service provider. There are plenty of reputable companies that can help you out with foreign qualification, but here are a couple of our favorites:
- Northwest Registered Agent – $100: For the amount and quality of service you get with Northwest, their price is unrivaled. They’ll take care of all your foreign qualification paperwork, and they offer next-level personalized customer support, making Northwest an extremely solid choice.
- IncFile – $149: They might charge a slightly higher rate, but it’s well worth it, and their customer feedback is fantastic. Search for InFile online and you’ll find thousands of reviews. You can spend hours wading through them without finding more than a few bad ones.
- LegalZoom – $229: Yes, LegalZoom’s price point is higher than IncFile and Northwest, but if you’re looking for a well-established brand with a ton of experience, they’re a decent choice. Just take a look at their 100% satisfaction guarantee and their extended customer support availability, and you can see why they’re so popular.
Any of these three companies will help you foreign qualify your LLC quickly and correctly, and each one offers reliable customer support, along with options for LLC formation service, registered agent service, annual report filing, and much more.
There you go – the basics for foreign qualifying your LLC. With this foundation of knowledge, you’re ready to start expanding your business far and wide. Of course, each state has its own foreign LLC filing and registration requirements, and it’s important to understand them before doing business there. Lucky for you, we’ve journeyed across the web, gathering up each state’s unique rules and compiling them in specific guides for all 50 states. Before expanding your business, check them out to make sure nothing falls through the cracks.
You’re a savvy businessperson, so you’re totally capable of DIYing your foreign qualification, but if you need a little help, an online business services provider can take that weight off your shoulders, freeing you up to prepare for your LLC’s future success.
Whether your goal is a nation-spanning empire or a small, two-location shop, you’ll be ready to comply with each state’s specific laws. And once you’ve secured foreign qualification, your LLC is ready to roll.