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 where 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.
What happens if I fail to foreign qualify before doing business in Indiana?
Foreign qualifying is essentially asking permission to do business in the state of Indiana. 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 Indiana yields consequences that are far costlier than registering in the first place.
If you fail to foreign qualify before doing business in Indiana, your LLC will incur severe penalties. It will be prohibited from maintaining an action or proceeding in any Indiana court; plus, it will be liable for a civil penalty of up to $10,000.
That’s pretty steep and frankly not worth the risk. Keep in mind, that $10,000 penalty does not include any other fees or LLC taxes that you may have accrued during your LLC’s time in Indiana.
Transacting business in Indiana without permission, however, will not invalidate any contracts you currently hold, and it won’t prevent you from defending a proceeding in court.
You can go straight to the source and read more about these penalties in Indiana Code Sec. 23-0.5-5-2.
What is considered “doing business” in Indiana?
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Indiana? While Indiana law is fairly quiet on the specifics, other state and tax laws shine some light on the subject. Typically, you’re considered to be “doing business” in most states and required to foreign qualify if:
- You have a physical presence, such as offices, warehouses, stores, etc. in the state.
- Agents, salespersons, or other representatives are doing business on behalf of your LLC in the state.
And, of course, you can’t escape taxes. Your LLC may be liable for specific business taxes in Indiana, depending on how you’ve set it up. The state knows how to tax you based on your foreign qualification. Make sure you foreign qualify to avoid larger tax penalties down the line. It’s important to always stay on top of your LLC’s taxation requirements to avoid any unwelcome surprises.
If you’re unsure whether or not you need to file for a foreign qualification in Indiana, we suggest seeking legal counsel.
Could I be exempt from foreign qualifying in Indiana?
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Indiana. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
- Maintaining, defending, mediating, arbitrating or settling an action in Indiana court
- Holding meetings, or other activities centered on internal affairs
- Having accounts at financial institutions
- Selling products or services through independent contractors
- Soliciting or acquiring orders that require acceptance outside the state before turning into contracts
- Securing and collecting debts
- Transacting business in interstate commerce
- Facilitating a single transaction, within 30 days, that isn’t part of a series of similar transactions
- Owning property in Indiana
The Indiana Code has a full, detailed list of these exemptions, and we’d recommend glancing over that as well. If your only business activities in Indiana appear there, you’re probably in the clear regarding foreign qualification. Still, if you’re at all unsure, it’s wise to seek legal counsel.
How to Foreign Qualify Your LLC in Indiana
Foreign qualification in Indiana 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 Indiana, you’ll use the “Foreign Registration Statement.” You have the option to file it online or download a paper copy.
Despite your filing method, you’ll need to include a Certificate of Good Standing (no more than 60 days old) from the state where your LLC was formed. Contact your home state’s government to obtain a copy.
Since filing online submits your form immediately, it’s much quicker and easier than filing by mail. To start, go to the INBiz web portal and click “Login” to create an account. After you do, you’ll see a few options. Click “Secretary of State Business Service Division,” then “Out-of-State Business,” then “Business Formation.” From there, you just need to input your information, pay your $105 fee, and you’ll be on your way.
But if you’d rather fill out a paper form, you’re welcome to do so. Download Form 56369 from the Business Forms page, fill it out with your information, and then mail it to:
Secretary of State
Business Services Division
302 West Washington St., Rm. E018
Indianapolis, IN 46204
Live in Indianapolis? You can also submit your form in person as part of your weekly errands. Just drop it off, with your Certificate of Good Standing and payment, at the same address.
Like most government documents, filing to foreign qualify will cost you a fee. For paper submissions, the fee is $125, payable by check or money order made out to “Secretary of State.” Online, the fee is $105, and you’ll be able to pay with a credit/debit card as part of the submission process. The INBiz site accepts Visa, Mastercard, American Express, and Discover.
Standard processing time for mailed forms is 5-7 business days, and 24 hours for online submissions. So, again, if your goal is expediency, file online!
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
Like other states, Indiana has its own restrictions for business names. As you complete and file your paperwork, don’t overlook your name’s compliance with state law. Your LLC name must:
- Use a term that indicates its business type, like “limited liability company,” “L.L.C.,” or “LLC”
- Be distinguishable and available among all other businesses registered with the Secretary of State. Perform an Indiana LLC name search to make sure the name you want is available.
You can also reserve your Indiana business name if you’re not quite ready to foreign qualify your LLC. For more information regarding Indiana’s LLC name requirements, see Section 23-0.5-3-1 in the state code.
Should I hire a service to file my Indiana 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. Rather than trying to juggle everything yourself, you can bring on an individual or company to help you secure your LLC’s Indiana 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 Indiana foreign LLC qualifications 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 Indiana foreign LLC professionally registered, go with an online business service provider. There are plenty of reputable companies that can help you out with Indiana foreign qualifications, but here are a couple of our favorites:
- MyCompanyWorks ($99): MyCompanyWorks is one of the only service providers offering foreign qualifications for less than $100. This company receives excellent customer reviews and has a great track record of success, making it a smart choice for a wide range of entrepreneurs.
- IncFile ($149): IncFile offers a free LLC formation service that we have always appreciated, and its pricing for foreign qualifications is a reasonable $149. IncFile has the best customer feedback reputation in the industry, with tens of thousands of positive reviews available online.
- Northwest Registered Agent ($225): Northwest is more of a premium service, with the best customer support in the industry, in our opinion. They also include a year of their namesake registered agent service with every foreign qualification. There’s a reason Northwest is our #1 pick among the best registered agent services!
Frequently Asked Questions
When Is the Best Time to Foreign Qualify an LLC?
We think you should foreign qualify your LLC before you begin conducting business in a new state. If you don’t, your business could be subject to a broad range of fines and penalties for operating an LLC in a state where you don’t have permission to do so.
How Long Does It Take Indiana to Process a Foreign Qualification?
You’ll typically need to wait roughly 5-7 business days after the date of receipt for Indiana to process a mailed application, while online applications are usually processed within 24 hours.
Where Can I Learn More About the Indiana LLC Licensing and Permitting Requirements?
Chances are, you’ll require at least one license or permit to operate your LLC in compliance with Indiana state law. Unfortunately, Indiana doesn’t really have any official online guides to business licensing, so we advise checking with any relevant state agencies, as well as your county and municipal government, regarding any licenses or permits you may require.
Do I Need to File a Business Entity Report for My Foreign LLC in Indiana?
Yes. Whether you operate a domestic or foreign LLC in this state, you are required to file an Indiana LLC Business Entity Report.
What Is the Total Expected Cost of Operating an LLC in Indiana?
The overall costs of operating an Indiana LLC can vary considerably based on the specifics of your business. However, we created a helpful guide to help you identify and plan for every expense your LLC will face in this state.
Should I Use an LLC Service, Hire an Attorney, or Foreign Qualify My Own LLC?
The answer to this question lies in your personal preferences, but we can give some general pointers. An attorney will cost the most by a mile, but also provides expertise you won’t find with the other options. The DIY route is free of charge but can require quite a bit of legwork and provides no peace of mind that the process is being completed correctly.
Using an LLC service means your business will be foreign qualified by professionals who know what they’re doing, while also costing significantly less than a lawyer. This “best of both worlds” attribute is what makes LLC services our preferred option.
How Do Online LLC Services Work?
Using an online LLC service removes much of the hassle from the foreign qualification process. With these services, all you need to do is provide them with the name, location, and industry your business operates in, along with some info about yourself and your Indiana registered agent.
The service then files your Foreign Registration Statement with the state to qualify your LLC to do business in Indiana.
Are LLC Service Websites Legit?
Absolutely. There are quite a few reputable companies offering LLC formation service and foreign qualifications these days, including the two options we discussed earlier: MyCompanyWorks and IncFile.
In fact, while we certainly have our opinions about which ones offer the best pricing and features, every one of the incorporation services we discuss on this website is entirely legitimate and trustworthy.
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 Indiana 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.