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 Maine, you may need to complete a foreign qualification in Maine before you can expand there.
What happens if I fail to foreign qualify before doing business in Maine?
Foreign qualifying is essentially asking permission to do business in the state of Maine. 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 Maine yields consequences that are far costlier than registering in the first place. If you fail to foreign qualify, your business:
- WIll be prohibited from maintaining an action or lawsuit in Maine courts
- Can have any in-progress action or lawsuit stayed by the court
- Will owe the state a civil penalty of $500 for each year it has been transacting business in Maine
- Can be cut off from conducting business in Maine by the attorney general
Essentially, if you’re caught doing business without foreign qualification, your LLC will not only lose its revenue stream, but it could be charged with additional penalties and left without any power to pursue legal action. Those are pretty severe consequences, and simply not worth the risk. It’s best not to chance it and foreign qualify as soon as possible.
Interested in what Maine state law has to say on the subject? Check out Section 1629 of the state’s LLC Act.
What is considered “doing business” in Maine?
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Maine? The state’s Revised Statutes make reference to “transacting business” and “conducting activities” but don’t explicitly define them. However, we know from other state and tax laws that a company is typically considered to be “doing business” and required to foreign qualify if:
- Your LLC maintains warehouses, offices, stores or other physical presences in the state
- There are salespeople, agents, and/or other representatives operating on behalf of your LLC in the state
How you’ve set up your LLC will also determine if you’re liable for specific business taxes in Maine, and the state knows how to tax you based on your foreign qualification. At first, it might be tempting to dodge taxes by flying under the radar, but this could lead to heftier fines down the road.
If you’re unsure whether or not you need to file for foreign qualification in Maine, we suggest seeking legal counsel.
Could I be exempt from foreign qualifying in Maine?
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Maine. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
- Defending or settling lawsuits in a Maine court
- Any activities that only concern internal affairs, like holding meetings
- Maintaining bank accounts
- Having offices or agencies that transfer and exchange the LLC’s own securities
- Selling products or services through independent contractors.
- Securing and collecting debts, or acquiring and creating indebtedness
- Transacting business in interstate commerce
- One solitary transaction, not in line with similar ones, taking place within 30 days
- Owning real or personal property in Maine
Cross-check this list with your business activities in Maine and see how they compare. If your only activities appear here, you’re likely exempt from foreign qualifying. To double-check, you can go straight to the source, Maine’s LLC Act, Section 1623. But if you’re harboring any doubts, it’s best to get some legal advice.
How to Foreign Qualify your LLC in Maine
Foreign qualification in Maine 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 Maine, you need to get your hands on a Form MLLC-12: Statement of Foreign Qualification to Conduct Activities. This is your ticket to doing business in Maine.
Download and complete the form with all required information. In addition to your completed MLLC-12, you will need to submit:
- A Filer Contact Cover Letter (pg. 4 of the form)
- A Certificate of Existence or Good Standing from the state where the LLC was formed
- A payment of $250
Once you’ve gathered your materials, package them up and mail them to:
Secretary of State
Division of Corporations, UCC, and Commissions
101 State House Station
Augusta, ME 04333-0101
Or, if you’d like to physically drop them off and happen to live near Augusta, you can hand deliver your documents to the same address.
The $250 fee is payable by check, made out to “Maine Secretary of State,” or by card, but only if you include a “Credit Card Payment Voucher” with your other documents.
Processing times for foreign qualification applications are usually around 2-3 weeks. But if you’re in a hurry, the Secretary of State’s Office offers two expedited options: 24-hour service for $50 or immediate service for $100.
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
As you’re compiling your business information, requesting your Certificate of Existence, and filling out your forms, don’t forget the little details! Like making sure that your LLC name is compliant with Maine’s business name requirements. Your LLC name must:
- Contain the words “limited liability company” or “limited company,” or one of the following abbreviations: “L.L.C.,” “LLC,” “L.C.,” or “LC”
- Be completely distinguishable and available in the Secretary of State’s records (see here for distinguishability rules)
- Not use obscene language
- Not promote abusive or unlawful activity
- Not suggest an association with public institutions
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 Maine 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 Maine. For a $100 service fee, they’ll handle that paperwork so you don’t have to.