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 Mississippi, you may need to complete a foreign qualification in Mississippi before you can expand there.
What happens if I fail to foreign qualify before doing business in Mississippi?
Foreign qualifying is essentially asking permission to do business in the state of Mississippi. 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 Mississippi yields consequences that are far costlier than registering in the first place.
If you fail to foreign qualify, your business will be prohibited from enacting or maintaining an action or proceeding in Mississippi court. Plus, the Attorney General may cut you off from doing business in the state and assign the Secretary of State as your registered agent.
The prospect of losing your LLC’s income and legal footing isn’t a particularly encouraging one, so it’s best to foreign qualify as soon as you begin doing business. Despite these penalties, your existing contracts in Mississippi would still be considered valid, and you would still be able to defend a proceeding or lawsuit in court.
The Mississippi LLC Act, Section § 79-29-1013 provides further insight into potential penalties.
What is considered “doing business” in Mississippi?
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Mississippi? The state’s LLC Act doesn’t give specifics on what this phrase means, but 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 operates offices, warehouses, stores, or has other physical presences in the state.
- Your LLC has salespeople, agents, or representatives doing business on its behalf in the state.
Then there are taxes. While LLCs are typically pass-through entities, depending on how you’ve structured your business, you might need to pay certain corporate taxes. By foreign qualifying in Mississippi, you’re notifying the state of your tax status. If they don’t know to apply any particular taxes, you may end up with more severe fines in the future. For additional information on Mississippi taxes, visit the Department of Revenue website.
If you’re unsure whether or not you need to file for foreign qualification in Mississippi, we suggest seeking legal counsel.
Could I be exempt from foreign qualifying in Mississippi?
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Mississippi. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
- Maintaining, defending, or settling a lawsuit in a Mississippi court
- Holding meetings, or other activities solely concerning internal affairs
- Maintaining bank accounts
- Holding offices/agencies for the transfer and/or exchange of the LLC’s own securities
- Selling products or services through independent contractors.
- Collecting debts, or creating and/or acquiring indebtedness
- Owning real or personal property in Mississippi
- A single transaction – isolated from other business activity – taking place within 30 days
- Transacting business in interstate commerce
Do your business activities in Mississippi appear on this list? Are they the only business activities your execute there? Then you’re most likely off the hook with foreign qualification. However, it’s a good idea to glance over the full list in the state’s LLC Act and seek legal advice if you’re unsure.
How to Foreign Qualify your LLC in Mississippi
Foreign qualification in Mississippi 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 Mississippi, you will need to do so online, as the Secretary of State no longer accepts paper documents. Here’s how.
- Go to the online filing system
- Log in or create an account
- Under the “Name Reservation and Formation Filings” section, select the option to register and out-of-state business
- Follow the onscreen prompts to enter your business information
- Choose your payment option (see below)
At the end of your online form, you will see a screen that asks you to select a payment method for the $250 fee. You can either pay online with a credit/debit card, or you can print out your document and mail it, with a check, to:
Mississippi Secretary of State
P.O. Box 136
Jackson, MS 39205-0136
One more thing: you’ll also need to submit a Certificate of Existence or Good Standing from the state where your LLC was formed, dated within 60 days of your filing. Contact your home state’s government to obtain one.
Since the whole process is electronic, processing time is fairly quick, typically 24 hours, so your LLC should be registered in Mississippi soon!
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
Before you hit send on that application, double check to make sure that your LLC name follows Mississippi’s business naming requirements. You wouldn’t want your name to cause a hitch in the foreign qualification process. As a reminder, your LLC name must:
- Contain the words “limited liability company,” or the abbreviation “L.L.C.” or “LLC”
- Not use any of the following: “bank,” “banker,” “bankers,” “banking,” “trust company,” “insurance,” “trust,” “corporation,” “incorporated,” “partnership,” or “limited partnership,”
- Be completely distinguishable from all other names on record with the Mississippi Secretary of State
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 Mississippi 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 Mississippi. For a $100 service fee, they’ll handle that paperwork so you don’t have to.