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 Utah, you may need to complete a foreign qualification in Utah before you can expand there.
What happens if I fail to foreign qualify before doing business in Utah?
Foreign qualifying is essentially asking permission to do business in the state of Utah. 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 Utah yields consequences that are far costlier than registering in the first place.
If your LLC conducts business in Utah without foreign qualifying, it will be disallowed from maintaining or commencing any lawsuits in a Utah court. Not only that, but the Attorney General may also cut you off from doing business in the state.
Although conducting business without authorization won’t completely halt all of your LLC’s activities in Utah. For example, it won’t impair the validity of your existing in-state contracts, nor will it prevent you from defending a lawsuit.
Interested in the legal context for these penalties? Check out the Utah Code, Section 48-3a-902.
What is considered “doing business” in Utah?
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Utah? The Division of Corporations and Commercial Code provides this in-depth analysis of what it means to do business. In summary, you are considered to be “doing business” in Utah and required to foreign qualify if:
- Your LLC has an established and continuous physical presence in the state, like stores, offices, warehouses, etc.
- There is a level of permanence to your business activity in Utah, rather than seldom, isolated transactions
- You have employees, salespeople or representatives in the state who are working on behalf of your LLC
Generally, if your business is consistently profiting off of Utah’s economy, you’re doing business in the state.
And how could we forget to mention taxes? Depending on how you’ve structured your LLC, you may have to pay certain business-related taxes in Utah. Without foreign qualification on file, the state won’t know how to tax you. Initially, this might seem like a good thing, but in the long run, it’ll likely end up in greater fines and penalties.
If you’re unsure whether or not you need to file for foreign qualification in Utah, we suggest seeking legal counsel.
Could I be exempt from foreign qualifying in Utah?
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Utah. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
- Participating in litigation
- Carrying on internal affairs, like holding in-state meetings of managers or members
- Keeping bank accounts
- Maintaining offices for the management of the LLC’s own securities
- Selling products or services through independent contractors
- Creating or collecting debts
- Owning property in Utah
- Completing a single transaction—outside of your typical business dealings—within a window of 30 days.
Take a look at Utah Code, Section 48-3a-905 for a more detailed list. If your only Utah business activities appear here, congrats! You can likely skip foreign qualification. But, again, if you’re at all unsure, it’s best to seek legal advice.
How to Foreign Qualify your LLC in Utah
Foreign qualification in Utah 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 Utah, the quickest and easiest way to do so is through the OneStop Business Registration portal. This is also the method that the Division of Corporations and Commercial Code prefers.
The first thing you need to do is create an account. After you’re logged in, click “Begin Registration,” then, “I am registering a new business in Utah.” The site will guide you through a series of pages where you can input your business information. At the end, you’ll be prompted to pay the $70 application fee with a credit or debit card.
Even though the state recommends that you complete all filings online, they still accept paper forms. If you prefer to work with a hard copy, download the “Foreign Registration Statement” and fill it out with the required information. Make sure to type everything, as the state will not accept handwritten forms.
When finished, mail your application to the Utah Division of Corporations & Commercial Code at P.O. Box 146705, Salt Lake City, Utah 84114-6705.
You may also fax it to (801) 530-6438, but you must include a “Fax Cover Letter.”
You must also include a Certificate of Existence or Good Standing from your home state with both paper and online filings. This certificate cannot be more than 90 days old.
By mail, you can pay your $70 fee with a check or money order, made out to “State of Utah.” For in-person deliveries, pay with a check, card, or cash. Faxed forms must include credit card information on the Fax Cover Letter.
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 wouldn’t want your foreign qualification process held up by a non-compliant business name, so take a moment to confirm that your LLC name follows all of Utah’s naming rules. It must:
- Include “limited company,” “limited liability company,” “L.C.,” or “L.L.C.
- Not use any of the the state’s “restricted words.” Find a list of them here.
- Be distinguishable from all business entity names currently registered or reserved with the Division of Corporations and Commercial Code
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 Utah 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 Utah. For a $100 service fee, they’ll handle that paperwork so you don’t have to.