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 Minnesota, you may need to complete a foreign qualification in Minnesota before you can expand there.
What happens if I fail to foreign qualify before doing business in Minnesota?
Foreign qualifying is essentially asking permission to do business in the state of Minnesota. 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 Minnesota yields consequences that are far costlier than registering in the first place.
If you fail to foreign qualify, your business will be prohibited from commencing or maintaining an action or proceeding in Minnesota courts until it acquires a Certificate of Authority. The Secretary of State will be appointed as your registered agent and the Attorney General can cut off your business activities in the state.
However, transacting business without authorization won’t completely discontinue your activities in Minnesota. You’ll still be able to defend an action or lawsuit, and your prior contracts will still be valid.
Regardless, losing your revenue stream and legal footing in the state is not something you want to risk, so foreign qualify as soon as you begin doing business in Minnesota.
To see what state law has to say about it, see Section 322C.0808 of the Minnesota Statutes.
What is considered “doing business” in Minnesota?
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Minnesota? This isn’t explicitly defined in Minnesota’s Statutes, but generally, you are considered to be “doing business” in most states and required to foreign qualify if:
- Your LLC has a physical presence in the state. This could mean anything from offices to stores to warehouses, as well as other structures.
- Salespeople, agents, or other representatives are doing business on your behalf in the state
If you’re unsure whether or not you need to file for foreign qualification in Minnesota, we suggest seeking legal counsel.
Could I be exempt from foreign qualifying in Minnesota?
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Minnesota. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
- Maintaining or settling lawsuits in a Minnesota court
- Carrying on matters of internal affairs, like manager or board member meetings
- Having bank accounts in the state
- Transferring and/or exchanging the LLC’s own securities in the state
- Managing or holding title to real or personal property
- Making or investing in loans; creating or acquiring indebtedness
- Collecting debts
- A single, isolated transaction, not in the course of regular business activity, completed within 30 days
You’re likely exempt from foreign qualifying if you find your only business activities in Minnesota on this list. Look over the full list in the Minnesota Statutes, Section 322C.0803. But sometimes it’s hard to tell if your activities constitute doing business or not. In these cases, again, it’s wise to get some legal advice.
How to Foreign Qualify your LLC in Minnesota
Foreign qualification in Minnesota 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 Minnesota, you can do so online, by mail, or in person.
If you have deals on the table, clients ready for new projects, or if you’re just generally excited to start doing business in Minnesota, use the Business Services page to file online. This is the quickest method. To get started, you will need to create an account. Then, select “Limited Liability Company (Foreign)” from the list and the rest of the process will be smooth sailing.
But sometimes only a paper form will do. If you prefer to do business by mail, download the “Certificate of Authority for a Foreign LLC” form and follow the instructions on page 3. When you’re finished, send your form to:
Minnesota Secretary of State – Business Services
Retirement Systems of Minnesota Building
60 Empire Drive, Suite 10
St Paul, MN 55103
Do you call St. Paul home? Or will you be passing through on a trip? Feel free to drop your form off in person at the same address.
The fee for your Certificate of Authority varies depending on how you file. Mailed forms require a $185 fee, while online and in-person deliveries cost $205. This is because online and in-person submissions receive expedited (24-hour) processing, while mailed forms are processed in 2-4 days.
Here’s how you can pay:
- Online: Credit or debit card
- Mail: Check or money order made payable to “Minnesota Secretary of State”
- In Person: Check, money order, or card
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
Let’s not forget the all-important state naming rules. A non-compliant name can throw a hitch into your whole registration process, so double check that your name is acceptable. In Minnesota, your LLC name must:
- Use the words “limited liability company” or the abbreviation “LLC”
- Be in the English language or a language expressed in English characters
- Not contain “corporation,” “incorporated,” or any abbreviation of either word
- Not use terms that would indicate it was formed for an unpermitted purpose
- Be distinguishable from every other business entity name on record with the Secretary of State (see here for instructions on checking name availability)
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 Minnesota 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 Minnesota. For a $100 service fee, they’ll handle that paperwork so you don’t have to.