Seeing your company grow is exciting. It may push you to think of ways to expand your operations. If you want to do business in states other than the one where you organized your company, you will have to understand foreign qualification and registering as a foreign LLC.
What It Is A Foreign LLC
Some people find the concept of foreign qualification confusing. From the name itself, it may seem like it refers to international business entities. However, that is not the case.
Generally, foreign qualification is the registration process that a company has to go through if it wants to operate in a jurisdiction or state other than its place of formation. For instance, in Montana, an LLC is domestic if it was formed in that state. However, if you originally organized it in a different state, it will be a foreign LLC in Montana.
Montana does not require all foreign companies to register. A company will have to foreign qualify only if it is transacting business in the state. You will have to register if you have a physical presence or nexus with the state. That means having any of the following:
- A warehouse in Montana
- A store in Montana
- A Montana office
- A sales representative in Montana
If the only activities that your LLC does are any of the following, then you do not need to register:
- Settling or defending a lawsuit
- Dealing with internal affairs like the manager or member meetings
- Maintaining a bank account in the state
- Having an office, people, or agency in Montana handling the LLC’s securities
- Selling products through independent contractors
- Soliciting orders that require acceptance outside Montana before they become contracts
- Creating or obtaining indebtedness, mortgages, or security interests in real estate or personal property
- Collecting or securing debts or enforcing mortgages and security interests in property that secures the debts
- Owning real estate or personal property acquired by any of the abovementioned activities, if you disposed of the property within 5 years after the acquisition, it does not produce income, or you do not use it in the performance of a function of the company
- Conducting an isolated transaction completed within 30 days and is not part of repeated transactions
- Transacting business in interstate commerce
Things To Do
When setting up a foreign LLC, you have to do certain things. Here are some of the tasks you have to complete.
- Obtain Certificate of Existence or Good Standing – The state requires you to submit an original copy of your Certificate of Existence or Good Standing from your home state. It has to be current and not older than 6 months.
- Follow Naming Guidelines – The state has naming guidelines that you have to follow. It has to include the words limited liability company or any of its abbreviations. Make sure your LLC complies with it. Another thing you have to ensure is the availability of your company name. You cannot register a company name if another business entity is already using it. To check this, you have to conduct a business entity name search on the website of the Secretary of State. If it is already taken, you will have to use a different one.
- Appoint A Registered Agent – All companies doing business in Montana have to nominate a registered agent in the state. It can be an individual who maintains a physical street address in the state and keeps regular business hours. You can also appoint a third-party organization that is authorized to transact in the state like DoMyLLC. Your registered agent is in charge of receiving service of process and other business documents on behalf of your LLC. They will also forward the said documents to your company.
- File Formal Paperwork – To complete your foreign LLC registration, you will have to submit formal paperwork. File a Certificate of Authority of Foreign Limited Liability Company Application with the Secretary of State. You should also pay the $70 filing fee. You will have to provide the following pieces of information to complete the form:
- LLC name
- The state where you organized your business
- The date when you formed your LLC
- The duration of the LLC
- Principal office street address
- Name and address of your company’s registered agent
- Business mailing address
- Whether your company is member-managed or manager-managed
- Names and address of current managing members or managers
- If your company is a professional LLC, state the professional services it provides.
- Authorized signature
- Know Your Obligations – The obligations of your LLC do not end after you successfully register with the state. You will have to file Annual Reports on or before April 15 of every year. It comes with a $20 filing fee.
Things To Avoid
There are also things you should not do to avoid encountering problems. Here are some of those that you have to keep in mind:
- Not Foreign Qualifying Your Business – If you are transacting business without foreign qualifying, your company will not be able to bring a lawsuit in Montana. Your LLC will also have to face a $5 penalty for every day that it operates in the state without a Certificate of Authority. It can reach up to a maximum of $1,000 annually.
- Not Filing Annual Reports – Failure to submit annual reports to the Secretary of State will result in a $15 late fee. Your company may also receive a notice of upcoming revocation by September 1. The revocation will take effect on November 1.
- Not Doing Your Research – The requirements and process in setting up a foreign business entity depend on the laws of the state. That means that these may vary depending on the state where you want to do business. Montana has set regulations that you have to follow, from the naming guidelines to compliance. Make sure you understand them before you start with the process. This way, you can prevent making mistakes that can affect your business.
Getting The Right Help To Register Your Foreign LLC
The multiple steps that one has to complete may be overwhelming for an entrepreneur. It can also be time-consuming. If you think you need help in setting up a foreign LLC, contact our team of experts at DoMyLLC.
Business Filing Section