Jack DonaldWhen you are planning to start a business, you need to determine not only the field of activity of the future company, but also its type. Today, one of the most popular business structures is an LLC.
Depending on the place of formation, LLC is divided into domestic LLC and foreign LLC. They have much in common, due to which new entrepreneurs may sometimes be confused. However, the difference between domestic and foreign LLCs lies on the surface and depends on the location of the head office.
If an Limited Liability Company operates in the same state in which it was formed, then this LLC is called domestic. The term “foreign” refers to a company which has a representative office and does business in this state, but its principal office is located in another state.
If a company’s primary business location is outside the United States, the “term foreign” company does not apply to it.
Let’s look at an example: if you form your LLC in California, it is considered to be domestic for this state. For any other state where the company opens its representative office, it will be considered as foreign.
Remember, you cannot start a foreign LLC in any of the states unless you have previously formed a domestic LLC.
In this article we will discuss how to start a domestic LLC, to operate it, under what circumstances a company is free to do business in another state, and when it is required to have a license.
How Do I Form a Domestic LLC?
The formation of a company is accomplished by the approval of the Articles of Organization by the Secretary of State or another agency with the same functions. The name of this document may be different, depending on the peculiarities of the state. It may be Certificate of Organization or Certificate of Formation, but their legal nature does not change.
There is no a universal Articles of Organization form for all states, but this document usually contains the following information:
- Name of an LLC;
- The nature of your business;
- Company owner’s information;
- Contact information for the registered agent;
- Physical address of the company.
Depending on your preference, you can file the Articles of Organization by mail, in person, or online.
Some states may accept this document in paper form or in electronic form only. Therefore, you should always take into account the specifics of the different filing options and requirements developed by the particular state.
The cost of the filing fee is at the discretion of each state. The average price for filing Articles of Organization ranges from $50 to $100.
In general, submitting the Articles of Organization is quite transparent. However, if it is your first time, we advise you to learn about the details of the document and how to fill it out.
If you want to make the domestic LLC formation process more effective and faster, use the professional services.
Hiring an attorney to form their LLC guarantees a high level of preparation and personalization of documents. This will be a great foundation for your future company and will also help prevent legal difficulties.
The only disadvantage of this variant is the price. Because of the high cost, the attorney service is sometimes out of reach for some startups.
However, this is not a reason to refuse yourself a quality service.
Think about hiring online LLC formation services, such as ZenBusiness or IncFile. The reliability and professionalism of these organizations is confirmed by their long-term history and thousands of positive reviews. You can check their comparison to choose the one that best meets your needs.
Signing a contract with such an organization is a definite plus for your company. You will get not only professionally formed domestic LLC, but you can also save on a number of other services such companies provide. The cost of most formation service fees is low and affordable even for small businesses.
Operating in the Other States
According to the law, the activities of a domestic LLC are limited to the state. However, this does not mean a complete ban on any outside contacts. The legal interpretation of the phrase “doing business” is such that sometimes a company can operate in other states without obtaining special permission.
Some start-up entrepreneurs believe that they must be foreign qualified in every state where they have customers. This is not true. Especially when it comes to selling goods or services online. You are free to sell your products using the company’s website without worrying about getting a license.
However, when it comes to a physical presence in another state, you should be careful. Opening a store, a warehouse, or even holding business meetings, in this case, may require special permission.
Terms to help you differentiate a Foreign LLC from a Domestic LLC
The differences between a Foreign LLC and a Domestic LLC are not always obvious. But there are a few signs that may help you figure out.
For example, terms. If you pay attention to the words used to describe the process of creating a company, you will probably understand what type it is. ” Qualify”, “register” and “authority to transact business” are indications of a Foreign LLC, while “form” or “create” are indications of a Domestic LLC.
Knowing and using the terms correctly makes it easier to understand the difference between these two types of businesses. But the help of a lawyer or an experienced accountant in this matter can be really valuable. Therefore, if you have questions or doubts about Foreign and Domestic LLCs, an expert consultation is the best way to make things clear.
Conclusion
To summarize, the domestic LLC is the initial stage of the company’s development, which plans to grow. Without such an LLC, expanding into other states and registering as a Foreign LLC is not possible.
The process of creating a company is quite easy, but requires little effort and time.
If you want to achieve your goal effectively, it is important to understand the law and follow the procedure, that is why many entrepreneurs hire an online LLC registration service.
The benefits of an online LLC registration service are undeniable. You will get high-quality, professional services at a reasonable price, which is significantly lower than the cost of hiring an attorney.
