Foreign LLC – What is a Foreign Limited Liability Company?


Steve Bennett
Steve Bennett
Business Formation Expert
Steve runs LLCBuddy, helping entrepreneurs set up their LLCs easily. He offers clear guides, articles, and FAQs to simplify the process. His team keeps everything accurate and current, focusing on state rules, registered agents, and compliance. Steve’s passion for helping businesses grow makes LLCBuddy a go-to resource for starting and managing an LLC.

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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.

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.

  1. 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.

  2. 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.

  3. 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.

  4. 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.

F.A.Qs

What is the cost of forming a foreign LLC?

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.

What happens if the LLC doesn’t have a foreign qualification document?

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.

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.

One of the key reasons why it is crucial to register as a foreign LLC is that doing so ensures that you are in compliance with local laws and regulations. Each country has its own set of rules governing the establishment and operation of businesses, and failing to adhere to these regulations can result in fines, penalties, or even the closure of your business. By registering as a foreign LLC, you are demonstrating that you are committed to operating within the legal framework of the country in which you are doing business.

Additionally, registering as a foreign LLC can provide you with certain legal protections that may not be available to you if you operate as an unregistered foreign entity. For example, registering as a foreign LLC can help to protect your personal assets in the event that your business runs into financial trouble. Without this protection, your personal assets could be at risk in the event of a lawsuit or other legal action against your business.

Furthermore, registering as a foreign LLC can help to establish your business’s credibility and legitimacy in the eyes of customers, suppliers, and other stakeholders. Operating as an unregistered foreign entity could raise red flags for potential partners or clients, who may be wary of doing business with a company that does not have a formal legal presence in their country. By taking the time to register as a foreign LLC, you are signaling to others that you take your business seriously and are committed to following the necessary legal procedures.

In addition to legal and reputational considerations, registering as a foreign LLC can also help to streamline your business operations. By officially registering your business in the country where you are operating, you can more easily open a bank account, hire employees, enter into contracts, and engage in other activities that may be necessary for the smooth operation of your business. Failing to register as a foreign LLC could create unnecessary administrative hurdles that could impede your ability to conduct business effectively.

Overall, the decision whether or not to register as a foreign LLC is not one to be taken lightly. While the process may require some time and effort, the benefits of doing so far outweigh the potential risks of operating as an unregistered foreign entity. By taking the necessary steps to register as a foreign LLC, you can help to protect your business, ensure compliance with local laws, and build credibility with important stakeholders.

In Conclusion

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.

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