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.
For example, if your LLC is registered in Washington and you are looking to open a second location in Maryland, you may need to complete a foreign qualification in Maryland before you can expand there.
What happens if I fail to foreign qualify before doing business in Maryland?
Foreign qualifying is essentially asking permission to do business in the state of Maryland. 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 Maryland yields consequences that are far costlier than registering in the first place. If you fail to foreign qualify, your business:
- Will no longer be able to maintain a lawsuit in Maryland courts
- Will owe the state a civil penalty of $200
- Each member of the LLC that conducted unauthorized business in the state will be guilty of a misdemeanor and charged a fine of up to $1,000
To reiterate: if you do business in Maryland without foreign qualifying, there aren’t just penalties for the company, but you and your colleagues can be held personally liable. Maryland is one of the few states that impose this type of misdemeanor, so it’s best not to play with fire; foreign qualify as soon as you launch in the state.
Maryland’s Revised Statutes, Section 4A-1007 gives a more thorough description of these penalties, if you’re interested.
What is considered “doing business” in Maryland?
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Maryland? Even though Maryland law is vague on the topic, in most states you are considered to be “doing business” and required to foreign qualify if:
- You have a physical presence, or nexus, in the state. This includes offices, stores, warehouses, distribution centers, etc.
- Salespeople, agents, and/or other representatives are conducting business on your behalf in the state.
If you’re unsure whether or not you need to file for a foreign qualification in Maryland, we suggest seeking legal counsel.
Could I be exempt from foreign qualifying in Maryland?
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Maryland. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
- Defending or settling an action, suit, claim, or dispute in Maryland court
- Carrying on activities relating to internal affairs, like LLC member and/or manager meetings
- Maintaining bank accounts in the state
- A single, solitary transaction, not part of other similar ones or typical business activities
- Forclosing on property or deeds of trust on property
- Acquiring property in the state by foreclosure or deed
- Holding and maintaining property acquired by foreclosure
- Selling or transferring property acquired by foreclosure
One more note on property: If you own other income-producing property in Maryland, other than the types of property designated by this list, you will be considered to be doing business.
Find a more comprehensive list of exemptions in the Revised Statutes Section 4A–1009. If your sole business activities in Maryland are on this list, you most likely don’t need to foreign qualify. Nevertheless, it’s good to seek legal advice if you’re not sure.
How to Foreign Qualify Your LLC in Maryland
Foreign qualification in Maryland 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 Maryland, have no fear, the process is fairly straightforward. You have two options: download and complete a paper form, or apply online.
Both options will require you to submit a Certificate of Good Standing from the state in which your LLC was formed. Contact your home state’s government to obtain one.
Often in business, efficiency is the name of the game and filing online is the most efficient way to foreign qualify. Follow these steps and you’ll be done in no time:
- Go to the Maryland Business Express portal
- Select “Register Your Business”
- Create an account
- Select “Create a New Business Filing”
- Choose “Non-Maryland Limited Liability Company”
- Input the required information on each subsequent screen
- Make your $100 payment (plus a $3 service fee)
Prefer to leave a paper trail? No problem. Download the “LLC Registration Form (For non-Maryland LLC)” and complete it with the appropriate information. Then mail it, along with your Certificate of Existence and $100 payment, to:
Maryland State Department of Assessments and Taxation
Corporate Charter Division
301 W. Preston St. Room 801
Baltimore, MD 21201
The $100 fee is payable by check, made out to “State Department of Assessments and Taxation,” or, if filing online, by credit/debit card. Standard processing time is up to eight weeks, but there is an option for 5-7 day expedited processing for an additional $50 fee. All online filings incur an expedited fee, as they are processed within three business days.
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
You’ve done a lot of work to get your LLC ready for foreign qualification, and you wouldn’t want to get tripped up by a detail like name compliance. As a reminder, in Maryland your LLC name must:
- Contains a signifier that confirms its status as an LLC, like “limited liability company,” “limited company,” “L.L.C.,” “LLC,” “L.C.,” or “LC.”
- Is available and easily distinguishable in the state’s records. Perform a Maryland LLC name search to make sure the name you want is available.
Should I hire a service to file my Maryland 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 Maryland 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 Maryland 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 Maryland foreign LLC professionally registered, go with an online business service provider. There are plenty of reputable companies that can help you out with Maryland 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 Maryland to Process a Foreign Qualification?
You’ll typically need to wait up to eight weeks for Maryland to process your application. That said, if you’re in a hurry, you can upgrade to 5-7 business day processing for a $50 expedited fee.
Where Can I Learn More About the Maryland LLC Licensing and Permitting Requirements?
Chances are, you’ll require at least one license or permit to operate your LLC in compliance with Maryland state law. For more information about business licenses and more in this state, check out the Maryland Business Express Licensing OneStop Portal.
Do I Need to File an Annual Report for My Foreign LLC in Maryland?
Yes. Whether you operate a domestic or foreign LLC in this state, you are required to file a Maryland LLC Annual Report.
What Is the Total Expected Cost of Operating an LLC in Maryland?
The overall costs of operating a Maryland 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 Maryland resident agent.
The service then files your LLC Registration Form with the state to qualify your LLC to do business in Maryland.
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 Maryland 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.