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 Virginia, you may need to complete a foreign qualification in Virginia before you can expand there.
What happens if I fail to foreign qualify before doing business in Virginia?
Foreign qualifying is essentially asking permission to do business in the Commonwealth of Virginia. 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 Virginia yields consequences that are far costlier than registering in the first place. If you fail to foreign qualify, your business:
- Will be prohibited from maintaining a lawsuit in Virginia courts
- Can be stopped from doing business in the Commonwealth by the attorney general
- Any LLC member, manager, or employee who participates in doing business with the knowledge that foreign qualification is required will be subject to a penalty of $500-$5,000
So, if your LLC conducts business without foreign qualifying, not only will you lose some legal rights and potentially your revenue stream, but you and your colleagues will also be held personally liable. Foreign qualification isn’t the most exciting way to spend your time, but it’s well worth avoiding these penalties.
That said, conducting business without foreign qualification will not cancel any of your current contracts, nor will it prohibit you from defending a lawsuit in Virginia courts.
Interested in hearing straight from the source? Take a look at Virginia Code, Section 13.1-1057.
What is considered “doing business” in Virginia?
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Virginia? Unfortunately, Virginia’s LLC Act doesn’t give a clear answer. However, tax laws tell us that you are considered to be “doing business” in most states and required to foreign qualify if:
- Your LLC has an established, continuous physical presence in the Commonwealth, like stores, offices, warehouses, etc.
- Employees, salespeople, or other representatives consistently operate on behalf of your LLC in the Commonwealth.
If you’re unsure whether or not you need to file for a foreign qualification in Virginia, we suggest seeking legal counsel.
Could I be exempt from foreign qualifying in Virginia?
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Virginia. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
- Maintaining or settling actions or proceedings in Virginia courts
- Activities that concern internal affairs, like holding meetings of managers or members
- Having bank accounts
- Keeping offices or agencies for the management of the LLC’s own securities
- Selling through independent contractors
- Facilitating orders that require acceptance outside the state before they become contracts
- Creating or acquiring indebtedness, deeds, and security interests in real or personal property
- Collecting certain business debts
- Owning real or personal property
- Conducting one outlying transaction, completed within 30 days, which isn’t part of a series of similar transactions
Find a complete list of these exemptions in the Virginia Code, Section 13.1-1059. If you find all of your LLC’s activities in Virginia here, you’re likely not required to foreign qualify. Still, if you’re at all unsure, it’s best to check with an attorney.
How to Foreign Qualify Your LLC in Virginia
Foreign qualification in Virginia 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 Virginia, you need to get your hands on Form LLC-1052. The fastest and easiest option is to submit this particular form online, but if you’d rather use a paper form, you can download it and fill it out with the following information:
- Your LLC name (and/or designated name, if your original name isn’t available in Virginia)
- The state where you originally formed your LLC
- The date you formed your LLC and period of duration
- Your principal office address
- Your Virginia registered agent’s name and address
- A signature from someone who has managing power in the LLC
Finished? Don’t file it yet! The State Corporation Commission also needs a Certificate of Good Standing from your LLC’s home state. Plus, the application fee is $100, which you can pay via check (payable to the “State Corporation Commission”).
Compile both of these items with your completed form and send them to:
Clerk of the State Corporation Commission
P.O. Box 1197
Richmond, Virginia 23218-1197
The SCC’s average processing time for foreign qualifications is 8-11 business days. But if you’re in a hurry, you can receive expedited service for online orders only: $100 for next-day service or $200 for same-day service.
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
Expanding to a new state is exciting, but in all that excitement, make sure to check over the little details, like confirming that your business name follows Virginia’s naming requirements. According to the LLC Act, your name must:
- Use the words “limited company” or “limited liability company” or their abbreviations “L.C.,” “LC,” “L.L.C.,” or “LLC.”
- Not use any terms that imply that it is a corporation or limited partnership.
- Be available and distinguishable in the State Corporation Commission’s records. Perform a Virginia LLC name search to make sure the name you want is available.
You can also reserve your Virginia business name if you’re not quite ready to foreign qualify your LLC.
Should I hire a service to file my Virginia 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 Virginia 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 Virginia 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 Virginia foreign LLC professionally registered, go with an online business service provider. There are plenty of reputable companies that can help you out with Virginia 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 Virginia to Process a Foreign Qualification?
You’ll typically need to wait roughly 8-11 business days for Virginia to process your documents. However, you can purchase expedited service upgrades for $100 (next-day) or $200 (same-day).
Where Can I Learn More About the Virginia LLC Licensing and Permitting Requirements?
Chances are, you’ll require at least one license or permit to operate your LLC in compliance with Virginia state law. For more information about business licenses and more in this state, check out Virginia’s convenient Licenses webpage.
Do I Need to File an Annual Report for My Foreign LLC in Virginia?
Yes. Whether you operate a domestic or foreign LLC in this state, you are required to file a Virginia LLC Annual Report.
What Is the Total Expected Cost of Operating an LLC in Virginia?
The overall costs of operating a Virginia 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 Virginia registered agent.
The service then files your Application for Certificate of Registration with the state to qualify your LLC to do business in Virginia.
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 Virginia 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.