A foreign Limited Liabilities Company (LLC) is registering your business in a different state from the one you registered your LLC. It is a requirement by law once you transact your business in another state that is not your State of organization. Not filing for foreign registration once you expand your business to other states exposes it to several penalties. Not every transaction constitutes conducting a business.
Different states have their definition of transacting a business there. But generally, doing the following will require you to file for foreign LLC.
- Having several meetings of members or managers in the foreign State.
- Having and maintaining bank accounts in that State.
- Having a physical address, retail store, manufacturing, or distribution facility in a foreign State that you use to conduct business.
- Engaging in litigation.
- Engaging in single or multiple interstate commerce
- Selling through independent contractors, sales agents, distributors, or a company representative.
- If your partner works and brings significant business to your company from a State different from the one your business is registered.
Some States have more activities that are deemed as transacting business in that State hence why you will need to contact a lawyer from the State you want to file for a foreign LLC for advice. You can also visit the Secretary of State there to determine what constitutes transacting business.
Contents
Consequences of not Filing for Foreign Registration
A company transacting business in a foreign State without registration is at risk of monetary penalties. If it is determined that you are conducting business and getting income from a foreign State without registration, you can be asked to pay a fine.
Apart from the fine, you will be required to pay back taxes for the period you transacted business in the State illegally, interest gained by the money owed to the State during the time of illegal business transaction.
The business does not enjoy legal protection in the State in which it conducts business illegally. If your business is not registered in a foreign State, you might not be able to bring litigation against another entity in that State in case of disagreements.
Process of Registering a Foreign LLC
Once you have determined the need to file for registration, there is a process that you are required to follow to ensure your application is successful. The process depends on the State you are registering your business, as each State has different requirements. But the following process is what is generally followed in most States;
- For you to register your business as a foreign LLC, you must have already registered your LLC in your primary State, as you will need a copy of the official LLC document. If you have not filed for LLC before then, you are ineligible for foreign registration.
- Carry out a name search on your company name in the Foreign State. This is necessary as your application might fail if there’s a company conducting business in that State with the same name. In such a case, you will be required to file using a fictitious name.
- Visit the offices or website of the Secretary of State in that State to determine the requirements to file for foreign registration.
- Fill out the Certificate of Authority or Application for Authorization and send it to the Secretary of State. You can also hire professionals or seek advice from a lawyer on how to go about the process.
Advantages of Filing for Foreign LLC
Apart from avoiding the penalties of conducting a business illegally in a foreign State, one receives several advantages with having applied for foreign registration rather than just LLC.
They include the following;
- Reduced costs of the application. A foreign registration usually costs less than applying for LLC.
- Fewer compliance formalities. As your business is already registered in another State, you will need fewer compliance requirements.
- Less administrative and record-keeping responsibilities. As the business is one entity running in different States, the workload reduced compared to having other businesses in different States.
- Certificate of Cancelation. If you are done transacting business in another State, you may wish to cancel your registration to avoid being required to pay taxes, file annual reports, among other requirements, in that State. You do not have to cancel, but it may be in the business’s best interests to do so.
- You will only need to file a Certificate of Cancelation in that State to cancel foreign registration.
Conclusion
Filing for Foreign registration is an advantage to your business, and every company that conducts business in a foreign State should strive to do so. It is a long and tiresome process but a very worthy one.
Also Read: the best kissanime alternatives