If I formed my llc in a state but have chosen to do most of my business in another state, do I file all over again in the new state?
– Norman, New Orleans
If you are actually “transacting” business in another state (state #2), instead of registering a new LLC, you will need to register as a foreign LLC in the new state.
The meaning of “transacting business” is defined by state statute.
Most states do not define what is considered transaction of business by a foreign LLC. Instead, they have a list of activities that do not require registration (I know, strange).
For example, here is Arizona’s statute regarding foreign registration (none of the following activities requires registration):
- 1. Maintaining, defending or settling any proceeding.
- 2. Holding meetings of the board of directors or members or carrying on other activities concerning internal corporate affairs.
- 3. Maintaining bank accounts.
- 4. Maintaining offices or agencies for the transfer, exchange and registration of memberships or securities or maintaining trustees or depositaries with respect to those securities.
- 5. Selling through independent contractors.
- 6. Soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if the orders require acceptance outside this state before they become contracts.
- 7. Creating or acquiring indebtedness, mortgages and security interests in real or personal property.
- 8. Securing or collecting debts or enforcing mortgages and security interests in property securing the same.
- 9. Owning, without more, real or personal property.
- 10. Conducting an isolated transaction that is completed within thirty days and that is not one in the course of repeated transactions of a like nature.
- 11. Conducting affairs in interstate commerce.
- 12. Being a limited partner of a limited partnership or a member of a limited liability company.
The difference between a regular or domestic LLC and foreign LLC is that a domestic LLC is considered domestic because of the state where it is formed. A foreign LLC is a Limited Liability Company that was created in one state but then registered to conduct business in another state.
Out of state entities are required to register with the state and able to conduct business is referred to as “foreign qualification.”
In order to register as a foreign entity, a name search like the one that was required to initially form your LLC is required to ensure the name isn’t already registered. If a business already exists with a similar name, a DBA can often be registered.
Next a Certificate of Good Standing will be needed and in some instances a Certificate of Authority from the state of formation will be required, along with naming a registered agent.
Before beginning work in a new state its vital to register, otherwise the LLC may face penalties and fines.