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 Wisconsin, you may need to complete a foreign qualification in Wisconsin before you can expand there.
Important Note: If you’d like to save time and have the foreign qualification paperwork taken care of for you, look into a reliable online service like Northwest Registered Agent.
What happens if I fail to foreign qualify before doing business in Wisconsin?
Foreign qualifying is essentially asking permission to do business in the state of Wisconsin. 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 Wisconsin 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 any action in Wisconsin courts until it obtains a Certificate of Registration
- Can have any of its ongoing legal actions stayed by the court
- Will owe the state all of the fees it would have incurred during its time doing business in Wisconsin had it been properly registered.
- Will owe the state an additional fee of up to $5,000
- Can be stopped from doing business by the Attorney General
Imagine that for a moment: your LLC has been caught transacting unauthorized business. You lose your legal power and revenue stream in the state. On top of that, you have, most likely, thousands of dollars in additional fees. It’s not a pretty picture. So, it’s best to avoid this scenario altogether by foreign qualifying as soon as you begin doing business in Wisconsin.
The Wisconsin LLC Act has more information on these penalties in Section 183.1003.
What is considered “doing business” in Wisconsin?
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Wisconsin? There can be some confusion surrounding this phrase because it’s not specifically defined by the LLC Act. But tax laws indicate that you are considered to be “doing business” in most states and required to foreign qualify if:
- Your LLC has a physical, continuous presence in the state, such as stores, offices, warehouses, distribution centers, etc.
- You have salespersons or representatives in the state who are working on behalf of your business.
And taxes have a role to play too. Depending on how you’ve set up your LLC, it may be subject to certain Wisconsin business-related taxes. When you foreign qualify, you’re letting the state know that you’ll be paying these, and if you don’t, you could run into some heftier fines down the road.
If you’re unsure whether or not you need to file for foreign qualification in Wisconsin, we suggest seeking legal counsel.
Could I be exempt from foreign qualifying in Wisconsin?
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Wisconsin. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
- Maintaining or settling any civil, criminal, administrative or investigatory proceeding in Wisconsin court
- Holding meetings, or other activities that deal solely with internal affairs.
- Keeping bank accounts
- Maintaining offices for managing the LLC’s own securities
- Selling products or services through independent contractors
- Facilitating orders that require completion outside the state before becoming contracts
- Lending money or acquiring indebtedness
- Collecting certain debts
- Owning property in Wisconsin
- Conducting an isolated transaction, completed within 30 days, that isn’t in a series of similar activities
- Transacting business in interstate commerce
If you see your only Wisconsin business activities here, you’re most likely off the hook for foreign qualification. For more in-depth descriptions of these exemptions, see the LLC Act, Section 183.1002.
How to Foreign Qualify your LLC in Wisconsin
Foreign qualification in Wisconsin 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 Wisconsin, you need to acquire a Certificate of Registration. To apply for one, head over to the Limited Liability Company forms page.
Scroll down until you find Form 521: Foreign LLC Certificate of Registration Application. The link will take you to an online form. Simply follow the onscreen prompts and you’ll be done before you know it. It helps streamline the process if you have all of your information ready when you begin. For reference, here’s what you’ll need:
- Your LLC name (and fictitious name if your original name wasn’t available)
- The state where you formed your LLC
- Your Wisconsin registered agent’s name and address
- Address of your principal office
- Your email address and other contact information
And, like many other states, Wisconsin charges an application fee for foreign qualification. You can pay this $100 fee with a card (Visa, MasterCard, Discover, or American Express, or eCheck.
Most states require foreign LLCs to also submit a Certificate of Existence from their home states, but Wisconsin does not, so don’t worry about obtaining one.
Typical processing time for the Department of Financial Institutions is five business days. But sometimes time is of the essence with foreign qualification, so if you need it done sooner, you can pay an additional $25 for expedited (next day) processing.
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
Like other states, Wisconsin has certain requirements for business entity names. You’ve done a lot of work to get your LLC foreign qualified, so don’t let it get tripped up because your name doesn’t comply! Make sure that your name:
- Uses the term “limited liability company” or “limited liability co.” or ends with the abbreviation “L.L.C.” or “LLC.”
- Does not contain language that implies it’s formed for an unlawful purpose.
- Is distinguishable from all other business entity names on record with the Department of Financial Institutions.
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 Wisconsin 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 Wisconsin. For a $100 service fee, they’ll handle that paperwork so you don’t have to.