From The LLC Handbook
Transacting business
An LLC is a domestic company in one state — its state of organization. It is considered a foreign company in every other jurisdiction. If an LLC wants to transact business in a state other than its state of organization, it will have to register as a foreign LLC with that other state’s business entity filing office.
Not every activity a limited liability company engages in constitutes “transacting business”. Most state LLC Acts list activities that are not considered transacting business, and that a foreign LLC may engage in without having to register. Generally, these lists include engaging in litigation, holding meetings of members or managers, conducting internal affairs, maintaining bank accounts, selling through independent contractors, creating, acquiring, or collecting debts, engaging in a single or isolated transaction, and transacting business in interstate commerce.
Consequences of transacting business without registering
A limited liability company transacting business in a foreign state may not bring an action in the foreign state’s courts until it registers. In addition, a foreign limited liability company doing business in a state before registering may be subject to a monetary fine. The theory behind the penalties is that an unregistered foreign limited liability company should not be able to reap the same benefits and protections given a domestic or registered foreign LLC, without having to pay for those benefits and protections.
Most Acts provide that an LLC’s failure to register will not impair the validity of its contracts or acts, prevent it from defending an action in the state or waive the liability limitation of its members or managers. In addition, once the previously unregistered foreign limited liability company registers and pays any penalties due, it may enjoy the same rights, privileges and protections afforded any other domestic or registered foreign limited liability company.
Name
In most states, a foreign LLC’s name will have to be distinguishable from the names of other business entities already on record. Consequently, before filing registration documents, the availability of the LLC’s name should be checked with the foreign state. If the LLC’s name is found to be available, it should be protected so that no other entity can take the name before registration. This is usually done through a name reservation.
If the foreign LLC’s name is not available due to a conflict, the LLC may be required to register under and use a fictitious name. A fictitious name must be available in the state.
Registration/Qualification
Registration is the procedure a limited liability company must follow to obtain the authority to do business in a foreign state. In some states the term used is qualification, instead of registration. Registration requires the filing of a document, generally called either an application for certificate of authority or an application for registration, executed by an authorized person.
The required content varies, although the application generally includes the LLC’s name, date and jurisdiction of organization, principal office address, name and address of agent for service of process, and names and addresses of the managers if any.
In most states, the application must be accompanied by evidence that the LLC was validly formed and is in good standing in its state of organization. Some of the states also require the good standing document to be dated within a short period of time before filing the application for registration. The period can range from one to six months or longer depending upon the state.
Amended registration document
A foreign LLC may be required to file an amendment to its certificate of authority or registration. Some Acts require an amendment to be filed when facts have changed making any statement in the original document false. Others require the certificate of authority or registration to be amended upon specific changes such as a change in name. In some states, the company may also have to file evidence of the change from the state of organization.
Change of registered agent
The states require a foreign LLC to appoint and maintain a registered office and registered agent in the state. The name of the registered agent and the address of the registered office are set forth in the application for registration or certificate of authority. The foreign state must be notified of a change in the agent or address. In most states, notice is given by filing a statement of change of registered agent or office. In some, an amendment to the registration document must be filed. If a new registered agent is being appointed, some states require the new agent’s consent to be on the document.
Cancellation of authority
An LLC that stops doing business in a foreign state can cancel its authority to do business there. Although an entity is not required to cancel its authority in a foreign state when it stops doing business there, it is to the entity’s advantage to do so, as it will remain subject to the state’s franchise tax, annual report, and other requirements until it is canceled. To cancel its authority, a certificate of cancellation is filed. In some states the foreign LLC may also have to state, or prove, that it has no outstanding tax liability in the state.
If the LLC is dissolved in its home state, or merged out of existence, it will have to be removed from the records of all of the foreign states in which it was registered. In some states, the foreign LLC must follow the same cancellation procedure required of LLCs that have merely stopped doing business. However, other states require the LLC to file a certificate of fact or a certified copy of the merger or dissolution documents that were filed in the formation state.
Revocation of authority
A foreign LLC’s authority to do business in a state may be revoked by the administrative act of the state filing officer, if it fails to comply with certain statutory requirements. Grounds for revocation vary from state to state. They often include a failure to pay fees, taxes, or penalties owed, a failure to deliver an annual report in a timely manner, and a failure to appoint and maintain an agent for service of process or file a statement of change of agent or address. Under the laws of most states, an LLC that has been administratively revoked may apply for reinstatement. However, the application may have to be made within a certain number of years after revocation.
For more information on LLCs, please see The LLC Handbook.
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