A Limited Liability Company is always based on state rules. It is formed in a particular US state where it has the main operational center. However, if at some point of time in the future, the business owners decide to expand the Limited Liability Company beyond the home state borders and in other states, it will be entitled as Foreign Corporation or Foreign LLC. What is a foreign limited liability company?
For example, an LLC is formed in the state of Michigan. And now, it wants to expand the business to Connecticut or New York. Under such cases, the LLC will be termed as a foreign Limited Liability Company.
On this page, you’ll learn about the following:
Domestic LLC VS Foreign LLC
A foreign LLC and a domestic LLC are almost the same, with the only difference being in their workplace. When an LLC is registered, it should be done under a particular state in the US. If companies operate in the same state as the home, they are termed domestic LLCs.
However, if the business is extended to a different state other than the origin, the Liability company will be known as a foreign LLC. This is because, in terms of the state, the LLC company isn’t formed there and has its origin in some states.
This is the major difference between domestic and foreign LLC. But, apart from this, certain meager facts are also there, which set these two apart, be it the cost of forming the company in another state or the legal documents needed to do so.
Need to form an LLC as a “foreign” entity
Even though several liability companies have been set up as a foreign entity in many states, a question always lingers in the air- why it is necessary to start the business as a “foreign entity” in another state.
When a liability company wants to operate in another state other than the home state, with proper registrations, it will be able to transact the business under a foreign government. Moreover, declaring the LLC as a foreign entity will allow the public to gain more information pieces about the business, starting with the name, member names, business address, registered agents, and so on.
Apart from this, once the company fulfills all the requirements of a foreign qualification, the government will be able to impose the taxation and legal rules on the same so that no unfair and biased judgment can be passed.
States Where Foreign LLC is formed
Foreign LLCs can be formed in different US states, like Connecticut, Michigan, Oregon, New York, California, Vermont, West Virginia, Kansas, Indiana, Arizona, Georgia, and so on. Every state almost follows the same rule for forming the LLC. However, minute details are there, which vary according to the state government. To know more about those requirements, you can hire a professional consultant like GoDaddy for your foreign LLC.
Qualifications to Form a Foreign LLC
People usually start to plan for a foreign LLC without considering when to file the application for the same. If you want your foreign application to be accepted, you must pass the following foreign registration requirements.
- Having a business bank account
- Principal office location, warehouse location, or any other dedicated site
- Certificate for ownership of property
- A representative in case the company has a distributor or manufacturer
- Employees working in the company
How to Form a Foreign LLC?
Time needed: 30 minutes.
Here are the simple steps to follow when forming a foreign LLC.
- Choose a business LLC name
The first step towards forming the foreign LLC is deciding the name of the company. The business name should be such that it doesn’t coincide with any existing corporation or LLC in the state, and also no keyword that would signify a government’s body. You can use popular business name search tools from professional consultants like GoDaddy to make sure your chosen name is legal and acceptable.
- Appoint a registered LLC agent.
What follows s hiring a registered agent to become your business’s first point of contact. The agent will be liable to carry on with all the taxation and legal works on behalf of your foreign LLC.
- Filing a certificate of existence or certificate of good standing
A certificate of existence or a certificate of good standing is essential to start up a foreign LLC. According to this document, it is proven that the company has met all the compliances and requirements stated by the government.
- File for the certificate of authority
Filing for the certificate of authority is the final step for forming a foreign LLC. This document will verify every operation and detail about the LLC, just like the Operating Agreement does for domestic corporations.
What if You Don’t Register as Foreign LLC
If you don’t register as the foreign LLC you might end up in legal troubles like fines and penalties, and inability to apply for loans, losing any kind of law protection within that state.
Whether you have an LLC or a corporation, you should be registered with the proper state. Each state has different rules and regulations for registering a company. You should follow their requirements and keep them in mind when deciding how to proceed. If you don’t register, you may end up with fines and penalties. For example, if you don’t register with the Florida Secretary of State, you won’t be able to sue for business deal failures. Also, you may be denied the right to do business in some states. Depending on your activities, you may need to register in other states as well.
A foreign LLC is a type of LLC formed in a state other than the one where the company is doing business. This is commonly required if you want to open a retail location or expand your operations. It can also be used for online businesses, which sell products and services across the country. To register a foreign LLC, you’ll need to complete an application form. The cost for this may vary from state to state. Typically, you’ll need to pay a filing fee and a small sum for a certificate of good standing.
The certificate of good standing (or certificate of merit) is a great example of a simple document you can order on the Internet. It can be requested by a business entity for a small fee, and it is a certificate of authority that demonstrates a foreign corporation’s or LLC’s eligibility to operate in your home state. In fact, it can be the most important business document you’ll ever get.
One of the most popular ways to achieve the aforementioned is to obtain a foreign qualification. It’s a little more complicated than that, however. Here’s what you need to do. First, you’ll need to do your research. Find out what the requirements are for the foreign state you’re interested in. Check out the website of the secretary of state for more details. Next, you’ll need to make sure you have a qualified agent. An agent is a person or company that can receive and file legal mail for you. Make sure they are available during normal business hours.
Lastly, you’ll need to perform a business name search. Searching the Internet for the name of a foreign company is a good way to find out if your business has already been registered. Some states offer a search tool that’s free, while others charge a fee. Using a third-party provider like ZenBusiness can save you time and trouble.
Finally, there are various ancillary fees you’ll need to pay. Besides the required filing fee, you’ll probably need to acquire a foreign business license, a permit, or a tax ID. Keep in mind that taxes may be different in the foreign state, so be sure to check out the requirements for each. Getting a foreign qualification could save you money in the long run.
Other than that, you’ll need to find a registered agent and a bank account in the state you’re doing business in. Finally, you’ll have to keep in mind the nexus of your business.
The cost of forming a foreign LLC varies from one state to the other. However, this fee is much higher than the registration cost of the domestic LLC. Apart from this, the LLC will be entitled to pay a franchise tax and an annual fee.
In case your LLC doesn’t have the proper documents for foreign qualification, you will not be able to pay the taxes, open a bank account, hire employees, and file taxes in the concerned state.
Having a foreign LLC in any of the states involves a series of paperwork and filing procedures. Before you form your foreign LLC anywhere in the United States, make sure you get all information regarding filing your LLC beforehand. Also, it is important to know about the restrictions on foreign businesses in a particular state before you start your foreign LLC in that state.