What Is a Foreign Limited Liability Company? Understanding the Basics

A foreign limited liability company (LLC) may not be what you think it is. In the United States, a foreign LLC is an entity formed to do business in states other than the one they were originally registered in.¹

This should not be confused with a corporation based in another country. The rules are different for those. In this article, we’ll explain what a foreign limited liability company is, and how to form one.

What Is a Foreign Limited Liability Company?

The term “foreign” can be somewhat confusing in this context. A Foreign LLC is not a corporation doing business in other countries. It’s a limited liability company doing business in other states. For example, if your state of origin is New Jersey, you would form a Foreign LLC to do business in Massachusetts.

Most states require the formation of a Foreign LLC if you operate within their borders. This should be done to avoid fines and penalties often assessed for non-registration. There may also be state tax liabilities. Speak to your accountant about how to deal with those.

🔍 Not what you were looking for? You might find our guide on opening an LLC as a non-resident more helpful!

Registering your business as a Foreign LLC legally expands your business operations and puts you in compliance with local laws and regulations.

Exemptions to the Foreign LLC registration requirement are:²

• Mail order and telephone sales
• National advertising campaigns
• Sales done by local independent contractors
• Mediation and arbitration appearances in court
• Opening accounts with local banks
• Collection activities against local businesses or consumers

The Formation Process of a Foreign LLC

Every state has its own business registration processes. Forming a Foreign LLC will require specific paperwork and a fee paid to the secretary of state’s office in the state in which you’ll be doing business. You are not required to file any new paperwork with your state of origin when you form a new LLC in another state.

What Documents Are Needed to Register a Foreign LLC?

The document to register your LLC in another state may be called an “application for a certificate of authority” or an “application for registration.” You’ll need that and your articles of incorporation.³

You’ll also need a “registered agent” in the state where your Foreign LLC is being formed. We’ll cover that in the “Compliance and Legal Obligations.” section below.

Understanding State-Specific Rules

State rules, fees, and tax obligations vary, so it’s important to do your research. For example, some states may have higher fees than your state of origin. Assuming that the cost of forming a Foreign LLC will be the same in every state could lead to financial unmanageability. It’s best to consult an accountant when doing this.

Compliance and Legal Obligations

Complying with state laws and regulations, including annual report filings and tax obligations, is important. You’ll need a registered agent (RA) based in the state where you’re forming the Foreign LLC to receive legal documents and notices. You should also have an attorney or a service to handle legal issues or problems.

Analyzing the Costs

According to Investopedia, the average cost to form an LLC in the United States is $129, while the average cost to maintain it is $104 per year.⁴ Those fees will vary by state and don’t include the cost of a registered agent or attorney. An RA typically costs between $150 and $300. Attorneys and accountants bill by the hour.

Maintaining Good Standing

Timely filings and understanding the nuances of state-specific laws can help you keep your Foreign LLC in good standing. Creating a compliance calculator can help to ensure you meet all deadlines. Remember, each state has unique requirements, so don’t assume that all registration renewals and state tax filings happen on the same days.

Another way to maintain good standing is to expand your business footprint through the Foreign LLC structure. That means leveraging local markets and resources to become an established business in your new state. State and local governments are more likely to support you if your company generates tax revenue.

FAQs on Foreign LLCs

Is a Foreign LLC the same as an international company?

No. A Foreign LLC is a limited liability company formed in a state other than your state of origin. When you expand your business over state lines, you do this to comply with state and local laws. International companies are based or owned by groups outside the United States.

How does a Foreign LLC differ from a domestic LLC?

A Foreign LLC is formed to do business in other states. The domestic LLC is the original limited liability company formed in your state of origin. You can use the domestic LLC to do business elsewhere if you’re running a mail-order or e-commerce business.

Can a Foreign LLC do business in any state?

You should form a foreign LLC in each state where you plan to do business. This can get expensive, so establish a large enough business footprint to justify the cost. Before moving forward, try test-marketing the new state.

What Is a Foreign Limited Liability Company: Summary

A Foreign LLC is an entity formed to do business in states other than the one they were originally registered in.

When establishing a foreign LLC, it’s important to consider and comply with legal requirements. You’ll need to understand state-specific rules, have your original articles of incorporation, and submit a Foreign Limited Liability Company application for registration, also known as an “Application for a Certificate of Authority.”

Once your Foreign LLC is established, it’s important to maintain it in good standing by renewing your registration on time and submitting state tax filings when they’re due. Using a compliance calculator or specialized service can help you keep track of these.

Looking for a Foreign LLC Business Account? Discover Wise Business

Expanding into another state can add an additional layer of complexity to your business, including your finances. Getting a business account is good practice in order to keep your personal and business finances separate.

But setting up a business bank account can take time and hassle. This is where the Wise Business account can help.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is easy to open online, and comes with no minimum account balance or monthly fees. Wise also makes it easy to send, hold, and manage business funds in 40+ currencies. You can also send money to 160+ countries.

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Wise Business connects to QuickBooks and to track bill payments, and other popular accounting software options. You can also make easy batch payments and, when the time comes, expand internationally by receiving currencies like a local with 8+ account details for a one-off fee.

Open a Wise Business account online

Some key features of Wise Business include:

Major local account details to receive international payments with ease No monthly account fees just a simple one-off fee for account details Receive payments from e-commerce platforms (such as Amazon or via Stripe). Create invoices using the Wise invoice generator or invoice templates. Accounting integrations, including a QuickBooks Bill Pay connection. Bill payments will be synced, matched, and categorized in QuickBooks for simple reconciliation. Batch payment options. Fast payment of up to 1,000 people.

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Sources:

¹legalzoom: limited-liability-company
²Conducting Out of State Business as a Corporation or LLC - FindLaw
³ What Is a Foreign LLC: Definition, requirements | Wolters Kluwer
⁴ How Much Does It Cost to Start an LLC?

All sources checked May 2024.