Starting a business takes courage but a business owner must be ready to handle a lot of responsibilities including being prepared to make big decisions. Perhaps one of the most important factors that needs to be considered is the place where the business will conduct its activities. For some entrepreneurs, they get started in the state where they live. You may be asking how to file an LLC when your business wants to reach customers in multiple states?
Doing Business Across States
If a business owner plans on doing business in multiple states, then the company will probably need to register in some or all of them. Before learning how to file an LLC, the business owner will have to understand two things first. Those are domestic and foreign LLC.
- Domestic – These LLCs are those that operate within the state where they were organized. For example, if the company was originally formed and registered in Alaska, it is a domestic LLC in that state.
- Foreign – LLCs expanding beyond state lines will be foreign business entities in all states except where they formed it. For example, if the business was organized in Alaska but it wants to do business in Alabama too, then it will have to be registered as a foreign LLC in Alabama.
So what constitutes transacting business? Generally, a company will have to foreign qualify if it does any of the following in the state:
- Maintains a bank account
- Accepts orders
- Has W-2 employees
- Has applied for a business license
- Has a physical presence
- Pays payroll taxes
- Conducts frequent in-person meetings with clients
Failure to register as a foreign LLC comes with several consequences. The company will not be able to defend itself in any of the state courts in case it gets sued. That is because the state does not recognize it as a legal business. It cannot file a lawsuit in that state as well. There may also be fines and penalties, along with all the back taxes that weren’t paid before.
Since domestic and foreign LLCs are all registered with the state, they are governed by state laws. That means the company will have tax, reporting, and filing obligations.
Knowing how to file an LLC will prevent the business owner from encountering legal issues and penalties. That is why it is important to understand the process for domestic companies and foreign business entities. While laws vary per state, there are some similarities in the steps that companies need to take. For instance, companies will have to submit formal paperwork and pay the corresponding fees. LLCs that plan on doing business in more than one state have to comply with all of the obligations that each state requires.
How To File An LLC
One of the most common questions of many new entrepreneurs is how they will form an LLC in various states. Contrary to what some may think, forming an LLC in all the states where you want to do business in is not always necessary.
What you can do is to organize a domestic LLC and register as a foreign LLC in all the other states where the business plans on conducting its activities. Here is a simple guide to help get started:
- Choose a home state. Before registering the company in multiple states, choose where you will organize the LLC. The state where the company is initially formed will be its home state. In most cases, entrepreneurs form their business entity in the place where they are located.However, a different state can be chosen depending on the circumstances and preferences. It is possible to form an LLC in a different state if it offers better benefits.Most business owners consider whether a state has a business-friendly environment. Owners should also check the cost of registering and maintaining a business, including business taxes.
- Register the LLC. Once a home state has been chosen, then the company needs to be registered with the appropriate agency. In most states, the business will have to file the Articles of Organization. It may also be called the Certificate of Formation. The filing comes with a fee. If you want to find out more about the process, check out our article for each state.
- Select other states. After successfully forming an LLC, a business owner will have to figure out which states the company will be conducting operations. Consider the activities of the business. If they constitute as a transacting business, then the company will have to foreign qualify.
- Register as a foreign LLC. There is no unified system for foreign qualification, so the process will depend on state laws. Generally, it requires the submission of formal paperwork and payment of filing fees. Those will vary as well. Most states may also require a company to submit a Certificate of Good Standing or Existence. You can get one from the company’s home state. Additionally, all companies will have to maintain a registered agent in the state where they operate. That includes the foreign state as well.
The formation and registration process is only the beginning. The company will continue to have obligations with the states where it is registered for as long as it exists. For example, the business may have to obtain certain licenses or permits. You may also have to pay taxes and file annual reports. Make sure to understand all of them to ensure compliance.
Forming an LLC comes with responsibilities. Doing business in multiple states means having more tasks to accomplish.
However, entrepreneurs have hectic schedules. That is especially true during the early stages. Because of that, many business owners find it hard to set aside time to learn the formation and registration processes.
What you can do is to get help from a seasoned third-party organization like DoMyLLC. Our team of experts can handle the preparation and filing of formal paperwork. From forming in the home state to registering as a foreign LLC in multiple states, our staff can provide the business owner with assistance. We can also help ensure that the company remains compliant with all of its obligations with each state. Contact us now to learn more.
Business Filing Section