If your LLC is established and firmly stands on its feet, bringing in serious revenue, this means it’s time to expand. Before that, however, you might want to learn the differences between domestic and foreign LLCs.
Each state is unique and has its own set of regulations, governing the LLC’s activity. If business conditions in one state seem attractive to you, you can open an office there. There is no need to register a new, separate limited liability company for this. Instead, you should apply for a foreign qualification, which is much quicker and easier. This will give you the opportunity to legally engage in commercial activities in this state, saving your time and money.
Consider that your responsibilities as a foreign LLC are different from those imposed on domestic LLCs. Understanding these specifics is essential since it lies at the heart of the successful business expansion.
By reviewing our state-by-state guides, you’ll have all the information you need to successfully start and operate a foreign LLC. We provide step-by-step instructions for foreign qualifying an LLC to help you find out more about all the peculiarities regarding opening a new office in a different state.
Let’s get to it!
What Is a Foreign LLC?
When it comes to a foreign LLC, some people assume that it refers to a company established outside of the United States. However, it’s just a common misconception.
In fact, the difference between domestic and foreign LLCs lies in their headquarters’ location. If you do business in the same state where you have an LLC, then your company will be considered domestic. However, if the state where you do business is not “domestic” for you, then the company gets the “foreign” status. For example, if you open a shoe store in Wisconsin, then your business is domestic in that state. However, your store affiliates, for the states where they were opened, would be considered foreign.
The reason for this division is that each state has its own set of laws. Bearing this in mind, before launching your business, make sure you understand the nuances of opening and operating a foreign LLC.
The process of registering a foreign LLC requires obtaining a foreign qualification in each state, where you plan to operate. This document serves as a confirmation that the company meets certain requirements of a particular state.
If you want to open an office in another state, make sure you know exactly what the term “do business” means there. This will determine whether you will need any permissions to do business or you can do without it.
Generally, the signs of doing business are:
- Physical presence in the state (e.g. an office, a store, a warehouse, a production unit, or other real estates);
- A close relationship between the state and the company (owning a registered vehicle, hiring employees, holding formal meetings with managers or participants, and sometimes, even a bank account or PO address.
Thus, a Foreign LLC is a company that:
- Operates in a state other than where it was founded;
- Operates within the concept of “do business”;
- Has a foreign qualification.
Consequences of Not Registering a Foreign LLC
In order to obtain permission to do business in another state, you will need to prepare and, of course, spend some money. When you first face it, foreign qualification may seem quite a hassle, but don’t even think of cheating. Trying to do business without foreign qualifications will sooner or later result in extremely unfavorable legal consequences for your company. Sanctions for companies that start their business without foreign qualification depend on individual state characteristics. The most common ones include:
- Ban on filing lawsuits to protect your company’s interests against unscrupulous clients or third parties;
- Fines and penalties, which can be as high as several thousand dollars;
- Loss of LLC status and, as a result, protection of the owners’ personal property in the event of creditor claims;
- Obligation to reimburse the state for unpaid taxes, penalties, and fines;
- State’s ability for any company to cancel any contracts it has entered into with you.
To summarize all of the above, trying to do business without registering a foreign LLC is absolutely unprofitable. Not only does it significantly limit the development of your company but it also threatens you with serious legal consequences. The charges you will have to incur in this case are many times greater than those of obtaining a foreign qualification.
How Do You File for a Foreign LLC?
The process of launching a foreign LLC has some peculiarities in each state, however, your basic steps should be as follows:
- Register a domestic LLC. In order to expand, you first need to ensure your business is valid in your “home” state;
- Choose a state to expand in. Check your local legislation and confirm if your business is considered “doing business”. If not, foreign qualification is not necessary;
- Visit the official Secretary of State’s website for a list of required documents and fees;
- Fill out the paperwork. Instead of Articles of Organization, foreign LLCs submit the Certificate of Authority or Certificate of Registration, which contains similar information. In addition, you may be required to attach a certified copy of a Certificate of Good Standing to confirm your LLC status;
- Make sure your foreign qualification form is complete, pay the foreign LLC fees, and file with the Secretary of State.
Should You Hire Someone to File Your Foreign LLC?
If you are too busy expanding your business to a new state, having a well-versed professional (for your state of choice) can really be invaluable. Thus, a professional lawyer will secure your LLC’s foreign qualification and help consider all the details to ensure that your documentation meets every regulation flawlessly, considering your business goals. However, when choosing this option, keep the cost in mind. As a rule, lawyer fees for foreign LLC qualifications do not fit well with startups on a tight budget.
Fortunately, there is always a way out. You can get your foreign LLC professionally formed without overpaying by choosing a professional LLC formation service provider. Hiring such a company will help you form and establish your new LLC fast, as well as foreign-qualify your LLC properly, and save your money.
The list of the best LLC formation services includes the following names:
- LegalZoom. Their foreign qualification service costs $229, which is not the lowest price on the market, however, the company offers a 100% satisfaction guarantee. If you are dissatisfied with the service (for any reason), you will get a full refund;
- IncFile. Foreign LLC creation package costs $149. And it’s well worth it! This company has a rich experience and thousands of positive online reviews, which guarantees the dignified quality of their services;
- Northwest Registered Agent. For only $100, you will get a 100% guarantee that all paperwork required for foreign qualification of your LLC is in good order. The main advantage of this company is its user-friendly, responsive customer support. With Northwest Registered Agent, you will get a personal expert guide, available at any time to provide professional advice on all matters related to opening a foreign LLC.
Whichever service you choose to set up your foreign LLC, it will give your business a significant boost. Professional companies will take care of your paperwork, including annual report filing, and monitoring deadlines, etc. Moreover, after signing a contract, you will get a free Registered Agent service for 1 year.
There you have it – we have discussed all the most important issues related to the foreign qualification of your LLC and doing business in other states. Even if you didn’t know anything about it before, you can now start expanding your business, broaden your horizons, and discover new opportunities.
When choosing a state for your new office, remember that all of them are unique. Each has its own foreign LLC filing and registration requirements that must be taken into account when making your decision. Carefully study all the conditions, offered by the state for business development, and if they are suitable for you, go ahead!
You can get a foreign qualification on your own or have one of the online business services handle the paperwork for you. The package prices of most professional online companies are quite reasonable, and the quality of their services is more than satisfying. Using them will allow you to make the process of secured foreign qualification more efficient, saving your time and money.