How to Operate an LLC Across State Lines

By Larissa Bodniowycz, J.D.

How to Operate an LLC Across State Lines

By Larissa Bodniowycz, J.D.

Creating a limited liability company (LLC) allows you to conduct business in the state where your LLC formed, but further paperwork is necessary if you want to extend your business outside that state. If your LLC conducts business in other states, you need to register your business in each of them. You also need to comply with the new state's business and tax laws.

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In order to know which states to register in, it is important to understand what doing business in a particular state entails. Unfortunately, there is no simple, uniform definition for doing business, and each state defines doing business differently. However, there are certain actions that count as doing business in most states, including maintaining an office in the state, obtaining a large percentage of business revenue from the state, and employing people in the state.

Registering Your Business in Another State

As with what constitutes doing business, the registration process for doing business in another state varies. States usually refer to the process for registering your LLC in states other than where the LLC formed as foreign qualification. They might also call it obtaining a certificate of registration or obtaining a certificate of authority. These different references all refer to the same process.

Foreign qualification in most states can be completed online, by mail, or through an online legal service provider.

  1. Access the website for the Secretary of State or comparable authority in the state in question.
  2. Search for the requirements for foreign qualification.
  3. Complete that state's form, pay the related fee, and provide the new state with proof that the business is in good standing in its home state. As of 2018, the fee for foreign qualification can vary from about $75 to hundreds of dollars.

Penalties for Failing to Register

Business owners typically want to avoid foreign qualification, and that's understandable — no one wants to pay an additional fee or complete more paperwork. However, avoiding foreign registration is not worth it. The penalties associated with failing to register are far worse than the minor inconvenience and fee for registering.

Many states impose late filing fees and collect all taxes and fees from when the LLC started doing business in that state. In addition, an LLC that is not registered in a state might not be able to file a lawsuit or even defend against one in the state. It is possible to resolve this issue with a late foreign qualification, but typically if a business waits until it needs to sue another person or business or defend a lawsuit before attempting to complete their foreign business qualification, the business encounters legal issues and expenses that would not have existed otherwise.

Comply with Business and Tax Laws

Registering as a foreign business is necessary, but it's not the only thing you must do when operating in a new state. You must also comply with the state and local laws of the new state while doing business there. These laws may be different from those in your business's home state and could require additional registrations. For example, if you open a new restaurant location in a state, you need to obtain any permits or licenses required to run the business even though you may have permits in your restaurant's home state. You must also pay applicable state taxes on income earned in each state where you do business.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.