What is a Foreign LLC?

After your company stood on its own two feet and started making good money, it’s time to think about moves or expansions to other states. But first, you need to understand the differences between domestic LLCs and foreign LLCs.

Each state is unique and has a certain set of rules that regulates the activities of an LLC. If you find the conditions of doing business in any of them attractive, you can open an office there.  And there is no need to register a new, separate limited liability company for that. It is easier and faster to apply for a foreign qualification. This will allow you to operate legally in that state, saving you time and money.

Remember, the responsibilities as a foreign LLC are different from those imposed on domestic LLCs. Knowing these specifics is very important. It lies at the heart of successfully expanding your business.

Our state-by-state guides will give you all the information you need to create and operate a foreign LLC. We’ll discuss step-by-step instructions for LLC foreign qualification, and find out why it is mandatory to do so before opening an office in the state. Let’s get started!

What Is a Foreign LLC?

Some people think that a foreign LLC is a company formed outside of the United States. But this is just a common misconception.

In fact, the difference between domestic and foreign LLCs lies in the location of their headquarters. If you do business in the same state where you formed an LLC, your company will be considered the domestic LLC. However, if the state where you operate is not your “home state,” your company gets the status of the foreign LLC.

For example, if you open a shoe store in Wisconsin, then in this state your business is a domestic LLC. 

However, the branches of that store would be considered “foreign” for the states where they were opened.

The reason for this division is that each state has its own set of laws. Taking this into account, before doing business, you should study the nuances of opening and operating a foreign company.

The process of registering a Foreign LLC requires you to acquire a foreign qualification in each state where you plan to operate. This document serves as proof that the company will meet certain conditions imposed by the territory of a particular state. 

If you want to open an office in another state, you should check what the term “do business” means there. This will determine whether or not you will need permission to conduct business activities, or you can do without it.

As a rule, the hallmarks of doing business are the following:

• Physical location in the state: having an office, store, warehouse, manufacturing plant or other real estate;
• Close connection between the state and your company:

• Owning a registered vehicle;
• Hiring employees;
• Holding formal meetings with managers or members;
• Having a bank account or mailing address (in some cases).

Thus, Foreign LLC is a company:

• Operating in a state other than the one in which it was founded;
• Whose activities correspond to the concept of “do business”;
• Having a foreign qualification.

What Are the Repercussions for NOT Registering a Foreign LLC?

The process of getting a license to do business in another state requires preparation and some expense. The first time you face this, you may think that foreign qualification seems like a hassle, but you shouldn’t be tempted to cheat. Doing business without foreign qualification, sooner or later, will cause extremely negative legal consequences for your company .

Penalties for companies, which do start their business without foreign qualification, depend on the specifics of the state. The most common of them are:

• Prohibition against filing lawsuits to protect your company’s interests from unfair customers or third parties;
• Fines, which can reach several thousand dollars;
• Loss of LLC’s status and, as a result, protection of the owners’ personal property in case of claims by creditors;
• Obligation to reimburse the state for unpaid taxes, penalties and fines;
• The possibility given by the public authority for any company to void all contracts signed with you.

To sum up, trying to conduct business without Registering a Foreign LLC is absolutely not profitable. It not only significantly limits the possibilities of development of your company, but also has serious legal consequences. The costs that you will have to bear in this case, is much higher than the price of obtaining a foreign qualification.

How Do I File for a Foreign LLC?

Each state has some specifics about the process of opening a Foreign LLC, but the basic steps you need to take are the following:

1. Register a Domestic LLC: to expand, you must first make sure that your business is valid in your “home” state;
2. Choose a state to expand into: check your local legislation and determine whether your LLC is considered to be “doing business”. If not, foreign qualification is not necessary;
3. Visit the Secretary of State website to find a list of required documents and fees;
4. Fill out the documents: instead of Articles of Organization, foreign LLCs will file the Certificate of Authority or Certificate of Registration, which contains the same information. In addition, you may be required to include a certified copy of the Articles of Organization or a Certificate of Good Standing confirming the status of your LLC;
5. Check that the foreign qualification form is filled out correctly, pay the foreign LLC fees, and file with the Secretary of State.

Should I Hire Someone to File My Foreign LLC?

If you are too busy to deal with expanding your business to a new state, you may be wondering, “Should I Hire Someone to File My Foreign LLC?” 

The help of a professional, who knows the law of the state you choose, can be really valuable.

A professional lawyer will secure your LLC’s foreign qualification and help consider all the nuances to guarantee perfect documentation. However, don’t forget about the cost of this option. Lawyer fees for foreign LLC qualification usually do not go well with the need to operate on a limited budget for a start-up company.

Fortunately, there is a solution. You can get a foreign LLC professionally formed without overpaying. Just choose one of the online business service provider that help you create and set up your LLC. Cooperating with such an organization will make getting foreign qualify your LLC quickly and correctly, and also will save you a lot of money.

The list of the best LLC formation service includes:

1. LegalZoom: the price of their services to get foreign qualification is $229. This is not the lowest cost on the market, but the company offers a 100% satisfaction guarantee. If you are disappointed with their service for any reason, LegalZoom will refund your money;
2. IncFile: the cost of their package to create a foreign LLC is $149. However, it is worth it. This company has a wealth of experience and thousands of positive reviews, which guarantees the quality of their services;
3. Northwest Registered Agent: for $100, you get a full guarantee that all your documents required for foreign qualify are in perfect order. A special feature of this company is their high-quality customer support, which provides each client with a personal guide. You will be able to contact them directly at any time and get professional advice on all issues related to opening a foreign LLC.

No matter which service you choose to create your foreign LLC, it will give your business a significant advantage. A professional company will take care of the paperwork, including Annual report filing and reporting deadlines monitoring. Also, when you contract with some of them, you will get a free registered agent service for 1 year as a bonus.

Wrapping Up

Well, we have come to the end, having discussed all the most significant issues related to foreign qualifying your LLC and doing business in other states. Even if you didn’t know anything about it before, now you can start expanding your business, broadening your horizons and opening up new opportunities.

When you choose where your company’s new office will be located, remember that all states are unique. Each of them has its own foreign LLC filing and registration requirements, which you should take into account before making a decision. Carefully read the conditions that the state offers for business development, and if they are appropriate for you, go ahead!

You can get foreign qualifying on your own or entrust it to one of the online business services, shifting the paperwork to them. The costs of most professional online companies are quite reasonable, and the quality of their services is at a very high level. Cooperating with them will allow you to make the process of secured foreign qualification more efficient, saving time and money.