What is a foreign LLC? Foreign LLCs are limited liability companies that are formed in one state and have registered as a foreign entity to conduct business in another.
A foreign LLC is simply an (LLC) limited liability company which has been created in state to register a foreign LLC for the conducting of business in another state. The business entity is known as a limited liability company that has been created in a specific state to register a foreign LLC for the purpose of doing business in another state.
Whereas, domestic LLCs are only enabled to do business in the particular state in which they have been formed. LLCs are limited liability companies that provide small enterprises the ease of forming partnerships while maintaining the personal responsibility protections associated with incorporation.
What is a Foreign Limited Liability Company?
Foreign LLC is one of the types of limited liability companies that operates in another state than it was established. It operates outside the state, so it does not apply the jurisdictions of the law of the state it was established in. so if the laws of the state it does business in are applicable.
Also, there is one misconception that goes like “A foreign LLC means that it’s a company that is established outside the United States it’s not true.
Learn more about the LLC definition here.
Does a Foreign LLC Need to be Registered?
It might be quite difficult for the owners or members of an LLC to decide if their business in any state outside of where their company was established needs to have their foreign entity registered. When you choose to register your foreign LLC, there are a number of guidelines you will need to adhere to from the other state. If one of the below conditions apply to your business, you must usually make your foreign entity official:
- You must have a brick and morter location within the state.
- There are employees who live or work within this state.
- This state requires that you own some type of property or real estate, yet this does not imply that you are engaged in business in the state.
- You must have an active bank account within the state.
- You have an official meeting with investors or managers in the state.
While we understand that you probably won’t want to add on any additional fees and requirements that are associated with being a foreign LLC, so not doing so could lead to expensive consequences. If your foreign entity is registered in the state where the property is located, you could be stopped from transferring title to your home state. It is not possible to sue for breaching a contract or damages of a contract if you have not already registered and enforced those rights.
With this type of scenario, you might be forced to pay penalties, back taxes, as well as fines during the time you performed business in the state that you were not registered for. An example of this would be in the state of California where you would be fined $20 per day for any transactions by a non-registered entity with a$10,000 maximum. For the state of Florida, a business can expect to see fines of $1,000 each year. However, in states such as Arizona and Texas, there are no such fines.
Due to the fact that LLC laws can vary wildly from state to state, it is essential to consult specific regulations in your home state. For example, in New Mexico, there is no need for a foreign registration for any transaction that it considers to be “one-off”. In many of these cases, it is recommended to consult with your attorney.
Should I Create Multiple Domestic LLCs?
Should you plan to form a new limited liability company and perform business in another state, you can be registered in the state as a domestic LLC. However, if this is done in several states, the businesses will be separately considered. This can actually be considered an advantage to many businesses as each one is going to have its own liability protection even from the other LLCs actions. As an example, if an LLC is forced to declare bankruptcy, none of the others would be affected. Whereas, businesses that have foreign qualifications in numerous states will share that liability regardless of where the business was completed.
Foreign LLC Registration
Foreign qualification is the procedure of obtaining permission to perform business duties in a different state. This is much like the domestic LLC registration process, where a signed submission from a manager or member is handed over to the secretary of state in addition to a filing fee. In the case of a foreign entity, the form will be rather different.
You will also need to ensure that the name is not currently registered within your state. If there is already a business with a similar name, your DBA or doing business will need to be registered as in that particular state. Additionally, you will need a registered agent with a physical address in the foreign state. Do I need a registered agent for my LLC?
The registration fees that are needed will vary state to state, but will generally be higher than those for a domestic LLC. Taking Oregon as an example, a domestic LLC will cost $100 whereas a foreign entity will cost $275 to register. In addition, some states also require re-registering and fees annually. Also, learn what is a corporation?