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 Nevada, you may need to complete a foreign qualification in Nevada before you can expand there.
What happens if I fail to foreign qualify before doing business in Nevada?
Foreign qualifying is essentially asking permission to do business in the state of Nevada. 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 Nevada 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 a lawsuit in Nevada courts until it has properly registered. In addition, your LLC will be subject to a civil penalty of up to $10,000.
That’s a pretty hefty fine. Combined with the loss of your legal standing in the state, it’s a big hit to your business, and not something worth risking. Make sure to foreign qualify as soon as you can to avoid these penalties.
Transacting unauthorized business, however, will not invalidate your current in-state contracts, and it won’t stop you from defending a lawsuit in a Nevada court.
Get more details directly from the state law in NRS 86.548.
What is considered “doing business” in Nevada?
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Nevada? The state’s LLC Act is fairly vague on the subject; however, according to other state and tax laws, you are considered to be “doing business” and required to foreign qualify if:
- Your LLC has offices, stores, warehouses or other structures constituting a physical presence in the state.
- There are salespeople, agents, representatives, etc. doing business on behalf of your LLC in the state.
And, of course, no matter which state you expand to, taxes will be there waiting. Every business entity in Nevada is required to pay a Commerce Tax for the privilege of doing business there. By foreign qualifying, you’re letting the state know that you will need to pay this tax. Now, maybe you’re thinking, “I just won’t qualify so I don’t have to pay,” but be warned: that could lead to much larger penalties down the line. For more information on the Commerce Tax, check out this FAQ page on the Department of Revenue website.
If you’re unsure whether or not you need to file for foreign qualification in Nevada, we suggest seeking legal counsel.
Could I be exempt from foreign qualifying in Nevada?
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Nevada. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
- Defending or settling a lawsuit in a Nevada court
- Activities only concerned with internal affairs, like manager or member meetings
- Maintaining accounts with banks or credit unions
- Having in-state offices for the transfer or exchange of the LLC’s own securities
- Selling products or services through independent contractors.
- Soliciting or completing orders outside the state before they become contracts
- Creating and/or acquiring indebtedness
- Securing and collecting certain debts
- Owning real or personal property in Nevada
- An isolated transaction, not in line with similar activities, taking place within 30 days
- Producing motion pictures
- Transacting business in interstate commerce
See your business activities on this list? You may be exempt from foreign qualification in Nevada. Still, it’s a good idea to read over the more detailed list found in NRS 86.5483 and consult an attorney if you have any questions.
How to Foreign Qualify your LLC in Nevada
Foreign qualification in Nevada 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 Nevada, you will need to complete and file a few different documents, and you can find all of them together here.
Let’s start with the main one, the “Application for Registration of Foreign LLC” (page 2), This is where you’re going to fill in most of the important LLC-related information, including official name, registered agent info, records office, and principal office. Page one of the document linked above contains step-by-step instructions for completion.
Your second task is to file an Initial List of Managers or Managing Members (page 3), which includes the names and addresses of each manager/member. If necessary, you can attach an additional 8.5/11in page with more names.
And there’s more. You will also need to submit a “Certificate of Acceptance of Appointment by Registered Agent” (page 4). This will include a signature of consent from your selected agent.
You’re almost there! As with all Nevada business filings, you’ll need to add a “Customer Order Instructions” (page 5-6), where you have the option to designate one of three expedited service options (24-hour, 2-hour, or 1-hour).
There are three fees associated with this filing. The main form will cost $75, the manager/member list is another $150, and your Business Licence Fee will be $200. You can pay via check or money order made out to “Secretary of State,” or by card (if you also submit the ePayment Checklist from page 8).
Phew. You’re finally ready to submit. You can mail or hand deliver your documents to:
Secretary of State
202 North Carson Street
Carson City, Nevada 89701-4201
Or, if you’re doing an expedited filing, you can fax it to (775) 684-7138
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 might be wading through a stack of forms, but don’t forget to double check that your business name meets all of Nevada’s requirements. It must:
- Use the words “Limited-Liability Company,” “Limited Liability Company,” “Limited Company,” or “Limited” or the abbreviations “Ltd.,” “L.L.C.,” “L.C.,” “LLC” or “LC.”
- Be distinguishable from all other registered or reserved business names on file with the Secretary of State
- Follow the rules outlined by the state’s Restricted Words List
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 Nevada 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 Nevada. For a $100 service fee, they’ll handle that paperwork so you don’t have to.