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 Massachusetts, you may need to complete a foreign qualification in Massachusetts before you can expand there.
What happens if I fail to foreign qualify before doing business in Massachusetts?
Foreign qualifying is essentially asking permission to do business in the state of Massachusetts. 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 Massachusetts yields consequences that are far costlier than registering in the first place.
If you fail to foreign qualify, your business will no longer be allowed to maintain or commence an action or lawsuit in Massachusetts courts. On top of that, the LLC will be subject to a civil penalty of $500 for each year that it’s been doing business in the state without foreign qualifying.
Despite these penalties, conducting business in Massachusetts without proper authorization will not prevent your LLC from defending a lawsuit in the state, nor will it cancel or invalidate any ongoing business contracts. Further, individual members and managers cannot be held personally liable.
But it’s simply not worth the risk. The foreign qualification fee – $500 – might seem steep, but you’d be charged at least that much (and probably a lot more) if caught doing business without authorization. It’s best just to register with the state as soon as you start doing business.
To read what the Massachusetts General Laws have to say on the subject, see Section 54.
What is considered “doing business” in Massachusetts?
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Massachusetts? Look to the state’s LLC Act and you’ll find a lack of specifics on “doing business.” However, other state and tax laws tell us that you are considered to be “doing business” in most states and required to foreign qualify if:
- Your LLC maintains stores, warehouses, offices, distribution centers, and/or other physical presences in the state
- Representatives, like salespeople and agents, are doing business in the state on behalf of your LLC
Since LLCs can be organized and classified in different ways for taxation, you may also owe certain LLC taxes in Massachusetts, and foreign qualifying would let the state know about your status. While it might be tempting to avoid these taxes by flying under the radar, this could lead to even more penalties in the future. 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 Massachusetts, we suggest seeking legal counsel.
Could I be exempt from foreign qualifying in Massachusetts?
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Massachusetts. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
- Maintaining, defending, or settling a proceeding in Massachusetts court
- Conducting activities solely related to internal affairs, like meetings of LLC members and/or managers
- Having accounts at financial institutions in the state
- Maintaining offices or agencies whose only purpose is the transfer, exchange, and registration of the company’s own securities
- Selling products or services through independent contractors
- Facilitating orders accepted outside the state before becoming contracts
- Transacting business in interstate commerce
- An isolated transaction, not in line with a series of other, similar transactions
See your only business activities in Massachusetts here? If so, you’re most likely off the hook with foreign qualification. It’s a good idea to glance over the state’s General Laws, Section 15.01, as it outlines these exemptions in greater detail.
How to Foreign Qualify Your LLC in Massachusetts
Foreign qualification in Massachusetts 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 Massachusetts, this form is going to be your best friend. It’s the one and only method for registering with the state as a foreign LLC.
Download and print the “Foreign LLC Application for Registration,” and fill it out using Adobe Acrobat or a similar program (the Secretary of the Commonwealth’s office won’t accept handwritten forms). Here’s the information you’ll need:
- Your federal employer identification number (EIN)
- Your LLC name (or alternate name if your is unavailable in Massachusetts)
- The state where your LLC was formed and date of its formation
- The principal office address
- If different from the principal address, the name and address of each manager (if any)
- The name and address of each person authorized to handle instruments regarding interest in real property (if desired)
- The name and address of your Massachusetts resident agent
Finished your form? Don’t mail or fax it just yet. There are a couple more documents that need to accompany it:
- A cover sheet (page three of the application)
- A Certificate of Good Standing from the state where you formed your LLC
- A $500 application fee. You can pay via check, made out to the “Secretary of the Commonwealth,” or by card for faxed forms
- A Fax Voucher Coversheet, if filing by fax
- For specific instructions on faxed forms, see here.
For mail or walk-in filings, you can send or deliver your documents to:
Secretary of the Commonwealth
One Ashburton Place, Room 1717
Boston, Massachusetts 02108-1512
Processing times for the Secretary of the Commonwealth’s office are fairly quick. Mailed applications are processed 3-5 business days after receipt, walk-in applications 1-2 days, and faxes within 24 hours.
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
Keep in mind that each state has its own rules about business names. As you expand to different states, it’s important to confirm that your real or alternate name complies with those rules. In Massachusetts, your LLC name must:
- Use the words “limited liability company,” or “limited company,” or one of the following abbreviations: “L.L.C.,” “L.C.,” “LLC,” or “LC.”
- Be distinct and distinguishable from every other business entity on record with the Secretary of the Commonwealth. It may not be deceptively similar to any names on record either (unless you have written permission from that company). Perform a Massachusetts LLC name search to make sure the name you want is available.
Should I hire a service to file my Massachusetts 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 Massachusetts 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 Massachusetts 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 Massachusetts foreign LLC professionally registered, go with an online business service provider. There are plenty of reputable companies that can help you out with Massachusetts 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 Massachusetts to Process a Foreign Qualification?
You’ll typically need to wait roughly 3-5 business days after receipt for Massachusetts to process a mailed application. Faxed documents are usually processed within 24 hours and walked-in forms take roughly 1-2 business days.
Where Can I Learn More About the Massachusetts LLC Licensing and Permitting Requirements?
Chances are, you’ll require at least one license or permit to operate your LLC in compliance with Massachusetts state law. For more information about business licenses and more in this state, check out the state’s Business Licenses and Permits webpage.
Do I Need to File an Annual Report for My Foreign LLC in Massachusetts?
Yes. Whether you operate a domestic or foreign LLC in this state, you are required to file a Massachusetts LLC Annual Report.
What Is the Total Expected Cost of Operating an LLC in Massachusetts?
The overall costs of operating a Massachusetts 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 Massachusetts resident agent.
The service then files your Application for Registration with the state to qualify your LLC to do business in Massachusetts.
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 Massachusetts 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.