Create an LLC

What is a foreign LLC & how to register as one in every state

What is a foreign LLC and how do you register for one in every state? Read through our in-depth article for more information on everything you need to know.

Jump to:
section

Table of Contents

There are several types of business structures entrepreneurs can choose to follow. One of these structures is known as a limited liability company (LLC). While looking into this type of structure, you may have come across the term ‘foreign LLC.’ But what exactly is a foreign LLC? Is it something you should consider filing for as a new business owner? We’re going to be answering these questions and providing you with step by step instructions, so you can register in every state.

What is a foreign limited liability company (LLC)? 

A Limited Liability Company (LLC) is a business entity that offers its owners liability protection. A foreign limited liability company (LLC) is an LLC that is formed in one state and registered in other different states since the business has transactions in different states. The foreign LLC has documentation that shows the information on the domestic state and the status, allowing the business to carry out various transactions in the domestic state1

Due to the increase in entrepreneurial activities, business personnel take risks and have businesses in foreign countries. While registering the business in another state, a business owner needs to consider the office of the secretary of state that outlines the state requirements before they have to file for UCC forms. 

A business has to register as a foreign corporation in another state. Before registering, small business owners need to read the Frequently Asked Questions (FAQS) to ensure they have all that is needed to make the process run smoother.

When your business is in a foreign LLC, you can purchase shares in the United States (US) without being a member of the board of directors. It, therefore, makes investment easier for people in other countries. 

The foreign LLC can be owned by a single person or a group of people. The business entity has to be assessed by the secretary of state to ensure that the state in which the business wishes to conduct its activities fits the expectations such as revenue in the department of state. The secretary of the state gives the certificate of authority that helps when applying for business activities in a foreign state. 

However, keep in mind that there are foreign qualifications that you must meet before opening a business/LLC in another state, you also have to pay franchise tax in the new state.

Companies, corporations, and partnerships represent the foreign LLC. The LLCs help to ensure healthy competition in the business environment between organizations. However, you must ensure that the proper rules, regulations, and requirements are met before beginning operations in a foreign country2

In addition, the foreign entity depends on different states with additional terms, such as foreign qualification, certificate of authority, or registration. 

When you first states up, the business is called the home state, while the industry is referred to as foreign when the business is in other states. A company registered as foreign has to pay taxes and adhere to the country's laws3

Domestic vs. Foreign LLC 

While a foreign LLC is formed in one state but conducts business activities in another state, a domestic LLC refers to a limited liability company that only operates in the states or countries they were formed. The foreign LLC has to observe the state's laws and pay taxes in the states that benefit the LLC more. 

Therefore, before a business owner chooses the states to have a company, they have to way for the advantages to ensure that the profits will still be greater even when they pay the taxes.

What do I need to register as a foreign LLC?

When a business owner has a business in more than one state, they must register for every state. If a business owner fails to register for the foreign LLC, they may be fined and penalized by the foreign state. A domestic LLC is found when a business owner has business activities in other states. Examples of business activities include selling products in other states through agents or distributors. The business has a bank account in a foreign country and holds business meetings in another state. Therefore, the state where the company started is the domestic LLC, while the other branches refer to the foreign LLC.

It is essential to understand when to register as a foreign LLC. When forming a limited liability company in their home state, but water wants to expand the business to different states, they must apply for a Foreign Qualification. Being registered will allow a business to have more full-time employees. The company can gas a bank account, hold and transact business activities in another state, and enable entrepreneurs to set up retail stores where they wish to sell their products in other states. In the home state, you must only file incorporations, while in foreign states, you are allowed to file more than one foreign entity registration.

However, you should check to ensure the businesses are properly registered and meet the standards of the foreign states. There are different factors that you have to consider when choosing states. For example, if there are one or more employees in a foreign state, does the business have a physical presence in the state, such as a storefront, office, or warehouse while doing business, Are there flowing orders in that state. 

In addition, are there plans to open a business bank account in the foreign state, does the business plan to expand in terms of purchasing land, is the business earning the state revenue, and does it adhere to tax policies in the new states. After the self-evaluation and the company has any of the opportunities mentioned, they need to register as a foreign LLC. They however must provide a certified copy of the annual report.

How to register as a foreign LLC in every state in general 

Different steps apply when registering as a foreign LLC in every state. Registering as a foreign LLC is also referred to as a certificate of authority, foreign LLC registration, statement of foreign qualifications to conduct activities, and registration application. 

  1. Conduct a name search

The first step is conducting a name search for the company. This is to ensure that no other business has the same name in the foreign state. If the name of the domestic LLC is similar to another company in the other state, then file for Doing Business As (DBA) name. This essentially allows the business to continue with its different activities.

The business name is, however, only fictitious. Conducting name research helps to ensure a safe space for growth since there will be no need to distinguish the business from others. The fictitious name is only used while you continues with the foreign entity registration (Garcia, 2021). 

  1. Find a representative 

Then, you select a registered agent that will represent the business in the state. This person will be responsible for accepting the process documents and official communications, receiving official emails, and ensuring the tax documents and employees' wages are up to the state's standards.

  1. Get a good standing certificate 

Thirdly, you have to provide a certificate of good standing from the domestic state. This document is evidence that the business has been legally existing and that all the requirements have been met in the registration of the business. 

Further, the company is assessed on the payment of tax and annual fees, and therefore a business may be considered in a bad state if there are late payments or failure to pay the yearly statements. The company remains in good standing when the transactions are conducted on time, allowing for foreign entity registration to have a higher percentage of being granted.

  1. Provide domestic LLC formation documents 

Moreover, you have to provide a copy of the domestic LLC's formation documents. Since formation, this has to be certified to show all the business's amendments. While filing for foreign entity registration, you may incur cheaper state fees when filed online; you may also pay for name reservations. The annual reporting and requirements needed in the domestic state are mostly required when applying for a foreign entity registration.

Foreign LLC registration requirements 

Foreign LLC registration requirements are essential when applying for a foreign entity registration. While registering for a foreign LLC, a business owner must follow the proper protocols and provide the complete documents as they are required in every step of the registration. One of the requirements is the company name in the home state, and any other names suggested for the foreign state. This will help in conducting a name search efficiently.  Keep in mind, that you may be required to pay for the service the process that manages the whole registration process in the foreign entity.

Additionally, a business owner has to have information on the formation state and when the business started. The business's principal office address or legal business address in the home state is required and also for the state of qualification. This may include the street address4

Further, they need to provide the names and respective addresses of officers (in the case of corporations) or the members in all the states. Further, you must also provide the name and official physical address of the selected registered agent in the state of qualification. In the case of corporations, a business owner requires the corporate officer's signature and also states the type of management of the company. The registration fee is paid to the secretary of state. 

Other additional requirements may be the duration that the business has been in existence, the names of different directors and their mailing address if the business is a corporation and financial details such as the assets the company has and issued stokes. These are confirmed by the registered agent. The stocks' respective dates were issued, the specific business goals clauses that define the activities that the company can take, and any other supporting documents for the specific business. Further, you also require the certificate of good standing and any other required documents from the state agency.

The registration process is cheaper for nonprofit organizations and online filing is more efficient since there are fewer foreign registration requirements (Garcia, 2021). The response time differs but the general time span is six to eight weeks for you to get a response. The requirements differ between small businesses and corporations. Remember to ensure you have legal documents to prevent the cancellation of the application. 

The filing fee differs according to state. A certificate of existence favours the business during the registration process since its activities can be assessed according to the past business activities in its home state. The state LLC is only recognized after successful registration. If the registration is successful, one does not require a new LLC.

References:

  1. Cueto Law Group
  2. Nolo
  3. Legal Nature  
  4. Journal of Economics, Business & Accountancy  
Free report and guide
How COVID-19 Impacted Incomes of the Self-Employed Workforce
How did the pandemic impact the income of  gig workers and entrepreneurs? Download to learn more.
Get The Report

More From