Business growth comes with many opportunities and changes. A company may start thinking about how it can reach more clients. One solution to this is to consider expanding operations or selling products to different states.
Choosing a new location to operate in is not as simple it sounds. Since each state has its laws governing business entities, a company will have to abide by those regulations. In some cases, it would require a foreign qualification.
What It Is
The term “foreign” can cause confusion at times. Some people may think that it refers to business entities originating from other countries. However, that is not the case here. If a company decides to operate in a state other than where it was organized, then it will have to register as a foreign business entity.
For instance, an LLC formed in Florida wants to do business in Maine. In that situation, it has to register as a foreign LLC in Maine. That means it has to go through a process that will legalize its operations in Maine.
What Doing Business Means
One of the things that entrepreneurs have to understand is what constitutes doing business in Maine. While there may be no strict definition for this, here are some activities that can be considered as transacting business in Maine and therefore require foreign qualification:
- The LLC has a commercial domicile in the state.
- It has employees in Maine.
- It directs activities at customers in Maine for the purpose of selling goods or services to them.
- It derives income from sources within the state.
It may also help to know what activities do not require registration as a foreign LLC in Maine. If any of the following is the only thing the company does in Maine, then it does not have to foreign qualify:
- It is maintaining, settling, or defending a court proceeding.
- It is holding meetings in the state.
- It has bank accounts in Maine.
- The LLC maintains offices or agencies for the purpose of transferring, exchanging, and registering the company’s own securities.
- It sells through independent contractors.
- It is soliciting or getting orders that require acceptance outside of Maine before they become contracts.
- It is acquiring indebtedness, security interests, and mortgages.
- It secures or collects debts and enforces mortgages or security interest on any property securing those debts.
- It conducts an isolated transaction that will be completed in 30 days.
- It transacts business in interstate commerce.
- The LLC owns and controls a subsidiary corporation formed in or transacts business within Maine.
Repercussions If The LLC Does Not Foreign Qualify
Generally, the foreign registration of a business in Maine gives the LLC permission to conduct its operations in the state. Failure to go through the process comes with consequences.
First, the LLC may be subject to fines. The state civil penalty is $500 for every year that the company has been transacting business without registration in Maine. Second, the business entity will not be able to bring a lawsuit and maintain an action in any Maine court. Third, the attorney general can prohibit the LLC from conducting business in the state.
How To Properly Register As A Foreign LLC In Maine
Companies seeking authorization to do business in Maine have to complete a multistep process. Here is a simple guide you can follow:
Step 1: Obtain a Certificate of Good Standing from the LLC’s home state.
Among the requirements for foreign qualification in Maine is the submission of a Certificate of Good Standing from the state where the LLC was formed. Some states may refer to this document as the Certificate of Existence. It has to be current within 90 days of the filing for foreign qualification.
Step 2: Conduct a business entity name inquiry.
The first thing an LLC has to do is to find out if its company name is available in Maine. If another entity has already registered in the state using the same name, then the LLC will have to think of an alternative or fictitious name. To verify the availability of the LLC name, conduct a business entity name search on the database of the Secretary of State. Companies that need to use a fictitious name will have to submit a completed Statement of Intention to Transact Business Under an Assumed or Fictitious Name form along with the foreign qualification paperwork. The filing fee for a fictitious name is $40.
Additionally, a foreign LLC should make sure that the company name complies with the naming regulations of the state. It has to include the phrase “Limited Liability Company” or any of its abbreviations like “LLC,” “L.L.C.,” “LC,” or “L.C.” The use of obscene language or any word that promotes abusive or unlawful activity is prohibited. Companies should also not use any term that could suggest association with a public institution or confuse the business for a government agency.
Step 3: Appoint a registered agent in the state.
Similar to the formation of the LLC in its home state, registering as a foreign LLC also requires the nomination and maintenance of a registered agent. They will serve as the point of contact of the company with the state. They agree to receive all government correspondence and legal mail on behalf of the LLC.
Maine allows the appointment of either an individual or a company. Read the Five Traits Of A Good LLC Registered Agent For Your Business to find out what to look for in an agent.
If it is an individual, they need to:
- Have a physical street address in Maine
- Be at the listed address during regular business hours
- Be over 18 years old
If it is a third-party organization, it has to:
- Have a physical address in the state
- Have someone at the listed address during regular business hours
- Be authorized to do business in the state
Step 3: Fill out the Statement of Foreign Qualification to Conduct Activities and file it with the state.
To formally register as a foreign LLC, a company will have to file a completed Statement of Foreign Qualification to Conduct Activities with the Secretary of State and pay the $250 fee. The state also requires the Certificate of Existence from the home state and submission of a Filer Contact Cover Letter.
Here are the necessary pieces of information to complete the forms:
- Statement of Foreign Qualification to Conduct Activities
- LLC name stated in its formation document
- Proposed name if the current one does not contain the proper designator
- Fictitious name if the current one is not available
- Date of formation
- The jurisdiction where the LLC was formed
- Principal office address
- Nature of the business or purpose to be conducted in Maine
- Name and address of the registered agent
- CRA Public Number if the registered agent is a company
- Names and addresses of each manager if there is any
- The date the foreign LLC commenced or is expecting to start doing business in Maine
- Name, capacity, and signature of an authorized representative
- Filer Contact Cover Letter
- LLC name
- A list of the types of filings attached
- Name, daytime telephone number, and email address of the filer
- Name, company, and mailing address where the state will return the attested copy
The state usually takes 2 to 3 business weeks to finish processing the documents. However, companies can request expedited processing for an additional fee. The 24 business hour processing will require the payment of another $50, while immediate processing will cost an additional $100. The Secretary of State’s office will only accept requests for immediate processing for in-person filings. In such cases, they will finish processing the documents while the filer waits. Otherwise, foreign LLCs can expect a stamped copy of the application to be returned by mail.
Getting Help From Experts
Starting a foreign business entity in Maine includes the completion of a state process. For some companies, it may be hard to set aside time to take care of the paperwork. Additionally, it may be too time-consuming as it involves researching and learning each step. The best thing to do is to hire a reliable third-party company like DoMyLLC. Contact us now to find out how we can help.