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 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.
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 LLC 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! 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 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 LLC member and/or manager 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 take 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 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.
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 (perform a New Jersey LLC name search to make sure the name you want is available)
You can also reserve your New Jersey business name if you’re not quite ready to foreign qualify your LLC.
Should I hire a service to file my New Jersey 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 New Jersey 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 New Jersey 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 New Jersey foreign LLC professionally registered, go with an online business service provider. There are plenty of reputable companies that can help you out with New Jersey 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 New Jersey to Process a Foreign Qualification?
We couldn’t find any official info about foreign qualification processing times in New Jersey. However, we will note that the state typically processes online business filings fairly quickly, so we wouldn’t expect that it would take more than a couple of weeks, at most.
Where Can I Learn More About the New Jersey LLC Licensing and Permitting Requirements?
Chances are, you’ll require at least one license or permit to operate your LLC in compliance with New Jersey state law. For more information about business licenses and more in this state, check out the state’s convenient Licensing and Certification Guide.
Do I Need to File an Annual Report for My Foreign LLC in New Jersey?
Yes. Whether you operate a domestic or foreign LLC in this state, you are required to file a New Jersey Annual Report.
What Is the Total Expected Cost of Operating an LLC in New Jersey?
The overall costs of operating a New Jersey 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 New Jersey registered agent.
The service then registers your LLC with the state to qualify you to do business in New Jersey.
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 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.