Washington LLC Foreign Qualification: Here’s What to do

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

Foreign qualifying is essentially asking permission to do business in the state of Washington. And the notion that “it’s easier to ask forgiveness than permission” doesn’t apply here. Failing to foreign qualify before doing business in Washington yields consequences that are far costlier than registering in the first place. If you fail to foreign qualify, your business:

• Will be disallowed from commencing or maintaining a lawsuit in Washington courts
• Can have its business activities halted by the Attorney General
• Will owe the state the total of all the fees and LLC taxes it would have paid during its time doing business in the state, had it been properly registered

Mull over those penalties for a moment. The fees your business will retroactively owe, like the $180 Foreign Registration Statement and the $60 Annual Report fees, add up fast, especially if you’ve been doing business in Washington for multiple years. But on top of that, you could lose your revenue stream and legal footing as well. All things considered, it’s best to foreign qualify as soon as you begin doing business in the state.

Despite these penalties, if you’re caught doing business without proper registration, it won’t invalidate your existing contracts, and it won’t prevent you from defending a lawsuit in the state.

You can find the legal context for these penalties in RCW 23.95.505 of the Revised Code of Washington.

What is considered “doing business” in Washington?

We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Washington? The state’s LLC Act doesn’t specifically define this term, but its tax laws indicate that you are considered to be “doing business” in Washington and required to foreign qualify if:

• You have an established and continuous physical presence in the state, such as offices, stores, warehouses, etc.
• There are employees, salespeople, or other representatives doing business on behalf of your LLC in the state.

Also, depending on how you structure your LLC and what type of business you do, you may have to pay certain Washington business taxes. When you foreign qualify, it lets the state know that you’ll be paying these taxes. Otherwise, you could run into some heftier fines down the line. For more information on Washington business taxes, see the Department of Revenue website. 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 foreign qualify in Washington, we suggest seeking legal counsel.

Could I be exempt from foreign qualifying in Washington?

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

• Maintaining, defending, or settling a lawsuit in a Washington court
• Carrying on activities solely related to internal affairs, like meetings of LLC members and/or managers
• Having accounts at financial institutions
• Keeping offices for the management of the LLC’s securities
• Selling through independent contractors
• Soliciting or obtaining orders that take place outside the state before becoming contracts
• Creating or acquiring indebtedness
• Collecting certain debts
• A single, isolated transaction, completed within 30 days, that is not in line with a series of similar business activities
• Owning, without more, property in Washington
• Transacting business in interstate commerce

Make a list of your business activities in Washington and then cross-check it with this one. If you find all of your activities here, you’re likely exempt from foreign qualifying. It might also help to check out the in-depth list in RCW 23.95.520. If you have questions, it would be wise to speak with an attorney.

How to Foreign Qualify Your LLC in Washington

Foreign qualification in Washington 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 Washington, your task is to submit a “Foreign Entity Registration” either online or via paper form.

Despite which route you take, you will need to obtain and submit a Certificate of Good Standing from the state where you initially formed your LLC. This certificate cannot be more than 60 days old.

Time is important when registering your business in a new state, and filing online is typically the quicker process. On the S.O.S. foreign entity forms page, choose the “File Online” option next to “Foreign Entity Registration.” This will take you to the online filing portal, where you need to create an account to continue. After you’re signed in, continue with your Foreign Entity Registration by following the prompts. You can pay the $180 filing fee with a Visa, Mastercard, or American Express.

But if you’d prefer to leave a paper trail, download and print the “Foreign Entity Registration” form. The form itself contains step-by-step instructions for how to complete it. If you’re filling it out by hand, make sure to use dark ink. When finished, include a check (made out to “Secretary of State”) and mail your materials to:

Secretary of State

Corporations & Charities Division

P.O. Box 40234

Olympia, WA 98504-0234

In a hurry? You can fast-forward the standard processing time by requesting expedited filing on your paper or online form. This service costs an additional $50 and ensures that your registration is processed within two business days. All expedited mailing must have the word “EXPEDITE” written on the envelope.

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

Don’t forget that each state has its own rules for business entity names, and Washington is no exception. As you’re preparing your foreign qualification materials, check to confirm that your LLC name:

• Uses the phrase “limited liability company,” the words “limited liability” and abbreviation “Co.,” or the abbreviation “L.L.C.” or “LLC”
• Does not use any of the following terms: “Cooperative,” “partnership,” “corporation,” “incorporated,” or the abbreviations “Corp.,” “Ltd.,” “Inc.,” “LP,” “L.P.,” “LLP,” “L.L.P.,” “LLLP,” or “L.L.L.P.”
• Is distinguishable from all other business entity names registered or reserved in the Secretary of State records. Perform a Washington LLC name search to make sure the name you want is available.

You can also reserve your Washington business name if you’re not quite ready to foreign qualify your LLC.

Should I hire a service to file my Washington 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 Washington 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 Washington 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 Washington foreign LLC professionally registered, go with an online business service provider. There are plenty of reputable companies that can help you out with Washington 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!

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 Washington 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.