While a limited liability company may be properly organized and operated according to the laws of its home state, this generally does not transfer into an automatic ability to cross state lines and conduct business. Most states recognize LLCs, but in order for an out-of-state LLC to transact business, it must register with the secretary of state or corporations in the new jurisdiction.
Individual state law contains specifics for registering an out-of-state -- or "foreign" -- LLC, but the process generally involves paying a fee and filing a notice, application or other similar document. At a minimum, the foreign LLC filing will need to contain the LLC name, the home state and the name and address of a registered agent for service of process. Some states make the secretary of state or corporations the registered agent for serving process upon a foreign LLC. With the growth of the Internet, many states now make all forms required to register a foreign LLC available online.
Problems can arise when the foreign LLC has a name that is identical or substantially similar to that of an entity already doing business in the state. Individual state law controls resolving conflicts among entities wishing to do business under the same name. In order to avoid this problem, members should consider reserving their company's name in every state where they expect to be transacting business in the future.
Purpose of Registration
Requirements for registering a foreign LLC serve several useful purposes. For one, the registration process can reveal the presence of an existing entity already doing business under the same name as the foreign LLC. As such, the foreign LLC can avoid expensive trademark infringement litigation by addressing the naming issue before a lawsuit ever arises. Furthermore, registration makes the entities doing business under fictitious names more transparent, thus limiting the ability of a person or company to hide from wrongs committed in another state and avoid being sued.
Penalties for Failing to Register
As with the registration process itself, the penalties associated with failing to register a foreign LLC before transacting business are dictated by the laws of individual states. Some states impose criminal penalties upon companies and members for failing to register. Other penalties include the charging of late filing fees and interest. In Texas, for example, a foreign company that fails to register can be fined $750 for each year of the deficiency. In Massachusetts, this fine is $500, as of 2010. Additionally, an unregistered foreign LLC will usually be unable to file a lawsuit in the state where it has failed to register until it cures its deficient filings. Such a company would be without the power to collect on accounts and enforce its rights until it properly registers.