Do I Need To Register My Business In Every State

The first time I started looking at buying investment properties exterior my home land, there was something that got me actually dislocated.

When I started my business organization, I formed my showtime LLC in the state of Michigan.

After researching how to do business concern in other states, I started hearing virtually how I might need to annals my LLC as a "foreign corporation" if I wanted to do business concern in any place exterior of my home state.

Given that my business organisation entity, physical office, bank accounts, mailing address, telephone number, and every property I had e'er owned were all in Michigan, I knew I was covered in my home state, but what if I wanted to start flipping properties in California, Texas, New Mexico or Florida? Could I use my Michigan LLC in those places too or was I required to register every bit a "foreign entity" in each of those states before I could do any deals there?

And what if I started doing deals without registering as a strange entity? Would there be consequences if I neglected to practise this?

My Attorney's Answer

I somewhen decided to get some real answers from a real attorney.

After I explained the specifics of how my business concern works, he told me that…

"Generally, you don't take to register your LLC in some other state if all you are doing is owning property.

If yous have employees or agents in the state, or if yous "deport business" in the country, then you would have to qualify to exercise business, but if you're simply owning the property, registering equally a foreign entity wouldn't be necessary."

And then my next question was,

"What exactly does it hateful to acquit concern in another state?"

Plain, the vacant land backdrop I was hoping to buy and sell would be located in those new states, but since I was working remotely, doing 99% of my work via telephone, email, and online, without ever setting pes over these states lines, would I notwithstanding exist "conducting business concern" in these state?

To effigy this out, my attorney gave me some questions to think about…

Does your business entity have a physical presence in that state (e.g. – satellite offices)?
Do you always travel to that state to conduct your business organisation?
Will you lot have employees in that country or rent contractors or subcontractors in that state to make significant improvements to the property?
Are you lot required to concord a business license in that land?
Are you buying and selling 1 property or several backdrop in that state per year?
How much of your visitor'south gross revenue is generated from that state?

In my case, I was able to confidently answer "no" or "not much" to ALL of these questions.

Furthermore, I wasn't planning to buy more than one or 2 properties per twelvemonth in each new land, and since the income generated from each state would be fairly minimal relative to my company'due south overall acquirement, I came to the decision that in my situation, I did not need to qualify as a strange corporation in any of these other states.

However, if I had answered "yes" to one or more of these questions, so I may have had to get through the motions of registering in these other states earlier doing business organisation.

Disclaimer: As always, please be aware that I am not an attorney and the information in this article should not exist interpreted as "legal advice". This commodity explains my understanding of the issues, simply my thoughts are no substitute for legal communication from a licensed and experienced attorney. Before yous act on anything described here, exist sure to consult with a legal professional person in your surface area to confirm you're working with the right data and assumptions.

Foreign Qualification Examples

To aid you lot meet the upshot from a few different perspectives, hither are some examples of businesses that well-nigh likelywould and about likelywould not need to qualify as a foreign corporation outside of their home states.

When Foreign Qualification Is Most Likely Needed

John forms an LLC for his business in California, but his office and several of his employees are physically located in Oregon. He well-nigh likely needs to consummate his foreign qualification in Oregon.

Jane lives in New Mexico, merely her business organization partner lives in Arizona. The visitor was formed in New Mexico, only Jane's concern partner generates almost of the visitor's acquirement from customers and clients in Arizona. She almost likely needs to register her New Mexico corporation as a foreign entity operating in Arizona.

Tom registered an LLC in Wyoming to run his real estate agency in the northern part of the state. He is also licensed to sell real estate in Montana and he regularly lists and sells backdrop there. He most probable needs to register his LLC equally a strange entity in Montana.

Sarah is operating a legal practice in New York and she wants to open upward a new role in Pennsylvania. She would virtually likely need to register for a foreign qualification in Pennsylvania.

When Strange Qualification Is About Probable Non Needed

Dave runs a title agency with a corporation formed in the state of Wisconsin. Virtually of the transactions his visitor closes are for properties in Wisconsin, merely occasionally their buyers and sellers are located in Illinois, Minnesota, and Michigan. Dave doesn't have any agents or employees who piece of work exterior of Wisconsin and most of the documentation is sent through the mail and e-mail, with very few visits to meet their clients in person outside of Wisconsin. He most likely does not need to qualify as a foreign corporation exterior of Wisconsin.

Kyle is a spider web designer who formed an LLC in Utah to run his company. Most of his work is done on the net and his clients work in several states effectually the land. Since he is not physically meeting his customers in other states, he has no physical presence outside of Utah, he doesn't demand a license to behave business in any other states and his acquirement streams don't have a stiff concentration in any single state. He almost likely does not need to register for a foreign qualification in whatsoever other state.

Wes is a real manor investor who formed an LLC in Florida, where his abode and role are located. He buys and sells backdrop in other states on occasion, but he isn't targeting whatever area specifically exterior of Florida, he doesn't have employees in other states, and he rarely visits the properties in person and his revenue from these backdrop outside of Florida isn't significant or recurring year-over-year. He most likely does not need to register as a foreign corporation in any other state.

Of class, these scenarios are only examples and they may non be directly relevant to your business concern or situation. Y'all should e'er bank check with your chaser or accountant to verify whether you need to qualify every bit a foreign entity in any other state.

How to Register in Another Land

If y'all need to register your business concern entity in some other land, the paperwork and process are fairly straightforward, just well-nigh states have small variations in the forms and processes they utilize.

One way to brand the process much easier is to enlist the aid of a service similar MyCorporation. I've used them for like registrations in the past and establish them very easy to work with.

Keep in mind that in virtually states, earlier they will grant their approving for your company's foreign qualification (aka – "Certificate of Say-so"), you tin expect them to bank check and verify that your business entity is in "good standing" in the home country where it was formed. This should already exist handled in the regular course of your business organisation, simply if yous've allowed this to lapse for any reason, yous'll desire to get information technology back in expert standing before you move forward.

Alternatives to Consider

Depending on your situation, it may make more sense to simply register a brand new business entity in the state where y'all're planning to operate.

For example, if yous're in the business of ownership and selling vacant land, and y'all're planning to get-go doing a lot more deals in a new state where you haven't previously washed much business, information technology could be simpler to merely starting time a new LLC in that new state and run all of those state-specific deals through your new land-specific entity.

Even aside from the event of having a domestic business entity in that new state, this could also offer some benefits in terms so spreading out the risk of your real manor portfolio by owning your properties in split up entities (so if one entity gets sued, the properties in your other entities would still be protected).

Registered a new entity (whether it's an LLC, corporation, or otherwise) is not difficult, especially if you apply a washed-for-you service like Rocket Lawyer, CorpNet, or IncFile.

What Are the Consequences of Non Registering?

Having never been in this situation, I tin can't tell you much from personal experience, but based on what I've seen and heard from others, the biggest consequence of failing to consummate your foreign qualification is that your company may accept to pay fines, penalties, and back taxes for the period of time in which your company went "under the radar" past conducting business concern in that state without registering appropriately.

Your company could also forfeit its correct to file a lawsuit in state court, so if yous e'er need to enforce a contract of any kind through a lawsuit (e.g. – if another political party fails to perform on a purchase understanding, country contract, assignment agreement, etc.) y'all may be giving upwards your power to recover damages if you lot aren't properly registered in the land where you're conducting business.

Keep in mind, this doesn't mean your business entity won't provide any protection at all. An entity that isn't properly registered tin however remain intact but y'all cannot file whatsoever counter-claims or cantankerous-claims. For example, if a contractor stiffs you lot on a rental rehab and your LLC was non registered in the land, the contractor could become whatsoever example dismissed on these grounds. In some cases, you may be able to bring a claim afterwards you lot register, but not until y'all annals properly as a foreign entity in that state.

If you're looking for some other supporting data to determine whether you need to annals as a strange entity and/or how the procedure works, the best advice you can go is usually by talking to an attorney, but I likewise found this article and this commodity to be quite helpful.

You can too try contacting a company like MyCorporation by phone or electronic mail if you lot take specific questions about how the process works and whether you demand to exist concerned nigh the outcome for your business.