If you formed your LLC and you “do business” in other states, you need to file for foreign registration in those states that tells the state that you’re doing business there. So the question is, “How do I know if I’m doing business in another state?” What does “doing business” mean?
The easiest example is if you’re physically located in a state but you filed your LLC in another state (think: Delaware in particular) for tax or other reasons. If that’s the case, you need to file for foreign registration in your home state that you’re physically located in.
But there are other times when you might or might not be doing business in other states. It’s usually based on the types of transactions you have with someone in that other state. Are the transactions “INTRAstate” or “INTERstate” transactions?
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Generally, Intrastate Transactions will require foreign registration, while Interstate Transactions do not.
INTRAstate transactions are those conducted within one state’s borders. For example, if your company expands and opens a warehouse in another state, and will sell products from that location to people in or outside that state, you will need to file for foreign registration in the state you're selling from.
INTERstate transactions are those conducted across state borders. If your company is located in your home state, and you have transactions (sell products, services) in other states, you will most likely not be required to file for foreign registration.
But there are other more specific factors the state will look at, and we'll discuss this more next.
If you have employees or a physical address in a state, you should probably register.
For example, you likely have a physical presence if you have an office located in another state where your employees go to work or meet with clients, a store where people shop, a warehouse where goods are stored, or a restaurant where people eat.
Do you conduct a "substantial" amount of business in another state?
The definition of “substantial amount” is still being interpreted even at the Supreme Court level. If you have a physical presence, you probably are conducting a substantial amount of business.
On the other hand, if you run an online business with out-of-state clients that you don’t meet with in other states, you likely don’t conduct enough business to the point where you need to file for foreign registration.
If you're not sure, check that state's specific laws.
If your business partner or active shareholder in your business lives in another state, meets with clients in that state, stores business goods, has business real estate, or is otherwise running a part of your business from another state, you need to register in that state.
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Of course, states will vary on the exact specifics as to the activities that don't require foreign registration. But generally, almost states agree to these general exceptions (can see your state's specific requirements by searching for "foreign entity registration requirements in [state name]":
Courts consider this an “isolated transaction.” Some states have a longer time limit than 30 days (Maryland for example does not have any time limit). To be safe, if your transaction takes more than 30 days from start to finish, just check the time limit for the state the transaction is taking place in.
Just because you are sued or sue someone in another state does not mean you need to register there.
You can hold your meetings out-of-state without needing to register. Some corporations love having meetings in exotic places, even if they don't do business there.
A new loan from an out-of-state lender doesn’t require registration.
Having clients in a foreign state who use your online services or order your products online, by itself, is usually not enough to require you to register in those clients’ home states.
If you need to register, learn how to register your LLC in a different state using foreign registration.
Related: Creating an LLC: A Step-by-Step Guide
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Chris Daming, J.D., LL.M. : Aug. 4, 2024
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