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New Jersey Foreign QualificationYour 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 New Jersey, you may need to complete a foreign qualification in New Jersey before you can expand there.

 

What happens if I fail to foreign qualify before doing business in New Jersey?

Foreign qualifying is essentially asking permission to do business in the state of New Jersey. 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 New Jersey yields consequences that are far costlier than registering in the first place. If you fail to foreign qualify, your business:

  • Cannot commence or maintain a lawsuit in New Jersey courts
  • Can be cut off from doing business in New Jersey by the Attorney General
  • Will owe the state a penalty of $200 per year (or part thereof) it transacted business without authorization.

That’s quite a lot to risk, especially considering the fee to foreign qualify is only $125. To avoid paying fines and losing your New Jersey revenue stream, it’s best to simply foreign qualify as soon as you begin doing business.

Sections 42:2C-65 and 42:2C-66 of the New Jersey Revised Statutes have more information regarding potential penalties. Take a look.

 

What is considered “doing business” in New Jersey?

We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in New Jersey? This isn’t outlined in much detail in the state’s LLC Act, but other state and tax laws indicate that you are considered to be “doing business” in most cases and required to foreign qualify if:

  • Your LLC maintains a physical presence in the state, such as stores, offices, warehouses, or other structures.
  • Your LLC has salespeople, agents, or representatives making transactions in the state on its behalf.

And, of course, there are always taxes to consider. Your LLC may need to pay certain business-related taxes in New Jersey, depending on how you’ve set it up. When you foreign qualify, the state can determine how to tax you. Yes, it’s probably tempting to try to avoid these taxes by skipping this step, but that will likely end up in more fines down the road, so resist the urge!

If you’re unsure whether or not you need to file for foreign qualification in New Jersey, we suggest seeking legal counsel.

 

Could I be exempt from foreign qualifying in New Jersey?

The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in New Jersey. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:

  • Maintaining, defending, settling, etc. an action or proceeding in a New Jersey court
  • Carrying on activities that apply to internal affairs, like manager or member meetings
  • Having bank accounts in the state
  • Transferring or exchanging the LLC’s own securities through in-state offices
  • Using independent contractors to sell products or services
  • Soliciting and completing orders that take place outside the state before becoming contracts
  • Creating or acquiring indebtedness, mortgages, or security interests in property
  • Collecting debts
  • Completing a single transaction—outside of your typical business dealings—within a window of 30 days.
  • Doing business in interstate commerce

Let’s say all of your business operations in New Jersey fall into that list. In that case, you’d most likely be exempt from foreign qualifying. Still, it’s a good idea to look over the more detailed list found in Section 42:2C-59 of the Revised Statutes and/or taking any questions to an attorney.

 

How to Foreign Qualify your LLC in New Jersey

Foreign qualification in New Jersey 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 New Jersey, you can take care of the whole process through the Division of Revenue and Enterprise Service’s online filing portal or by filing a Business Registration Application.

For either method, you will need to obtain and include a Certificate of Existence or Good Standing from the state where your LLC was formed. Reach out to your home state government to get one.

Once you’re on the online filing portal, click “Get Started” at the bottom of the page to – you guessed it – get started. Select “NJ Foreign Limited Liability Company” from the dropdown box and enter your business name. From there you’ll be directed through a series of pages that ask you to enter the following information:

  • Your LLC name (and an alternate name, if your name is unavailable in New Jersey)
  • State and date of your LLC’s formation, along with your effective date in New Jersey
  • A description of your business purpose in New Jersey
  • Your principal address
  • Your New Jersey registered agent name and address (it can’t be a P.O. box)
  • An authorized signature

At the end, you can pay the $125 fee by entering your card information.

There’s also a paper form option, although it’s a bit more tedious. But if you’d like to go that route, you can download the NJ-REG form and/or a complete business registration packet here. When you’ve completed the form, send it with a $125 check or money order to:

Client Registration

P.O. Box 252

Trenton, NJ 08646

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

New Jersey, like many other states, has its own rules for naming your LLC. Confirm that your name is in compliance before submitting your materials. Check that your name:

  • Contains the words “limited liability company” or the abbreviation “L.L.C.” or “LLC”
  • Doesn’t use any of the restricted words found here (with the exception of the ones listed above)
  • Doesn’t use profanity
  • Is distinguishable from the name of every other business entity on file with the Department of Revenue

 

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 New Jersey 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 New Jersey. For a $100 service fee, they’ll handle that paperwork so you don’t have to.