Organizing your business as an limited liability company provides the owners, known as members, with liability protection offered by state law. When you register your business as an LLC, it gives you legal authority to conduct business in the state in which your register. If your LLC, whether it is a single-member or multi-member LLC, starts transacting business in another state, you typically must register in that state as well. However, not all operations require a business to register, but LLCs that do not register as required can face penalties.
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LLC Status Is Determined by State Law
A business registered to do business in one state does not automatically have the right to do business in another state. Typically, registration in the LLC's home state does not cross state lines. Likewise, each state has its own rules for registering an out-of-state, or foreign, LLC. It is through this registration in a new state that the foreign LLC obtains legal status in the new state, allowing it to conduct business there.
Generally, if you are not actually transacting business in a new state, you do not have to register as a foreign LLC. For example, an LLC can likely drive one of its vehicles into another state without first registering in that drive-through state. However, an LLC cannot legally set up a retail store in another state without registering with the new state. Transacting business typically includes repeated business transactions in the new state, but there is no bright-line rule about what level of commerce is considered "transacting business." Each state makes its determinations based on the circumstances of a particular business.
Registering in Another State
Limited liability companies that want to transact business in another state typically must register with that state's secretary of state or its equivalent business registration office. Each state creates its own filing forms, requirements and fees. Generally, a foreign LLC must submit a form stating its name in its home state, the name it will use in the new state, where it was originally formed, the purpose of the business, its office address, its registered agent in the new state and whether it is member-managed or manager-managed. The new state may require the LLC to provide proof of its formation and status in its home state. Once the foreign company registers, it may have to file annual reports and pay annual fees.
Penalties for Failing to Register
Registration can seem like an unnecessary hassle, but an LLC can face penalties for transacting business in a new state without properly registering first. For example, an unregistered LLC does not have legal standing so it cannot file lawsuits in the new state if it is wronged. Also, courts in the new state can issue orders prohibiting the business from continuing operations, as well as forcing the business to pay the fees and taxes that it would have owed if it had registered as required, along with late fees.