Registering an out-of-state (foreign) LLC.

• Author: Ellentuck, Albert B.
• Position: Limited liability companies

Many limited liability companies (LLCs) engage in interstate business, rather than restricting their operations to one state. In such cases, an LLC is required to register as a foreign LLC in the states in which it does business (other than the state in which it is organized). Failure to register can result in penalty assessments (including criminal prosecution), although, in most states, a failure to register will not cause members to lose limited liability. However, an LLC cannot sue in a state court, obtain a license or perform other similar acts without registration.

Procedure

A foreign LLC generally registers to do business in a state by filing an application and paying a fee. An annual fee is also usually required. In most states, registration requires disclosure of the LLC's name, state of organization and the name and address of the registered agent in the state for which the application is being made. Forms and fees are available from the state agency charged with LLC registration.

Name issues: One potential problem when registering as a foreign LLC arises when the LLC's name is confusingly similar to an LLC already formed or registered to do business in the state. In such cases, the state statute controlling the use of a fictitious name must be consulted to determine if a remedy exists. The LLC may be allowed to do business in the state under a name different from its registered name in the state of organization. To avoid this problem, when an LLC is formed, the organizers should consider reserving its name in every state in which it anticipates conducting business. In any event, an LLC should always register a trade name or fictitious name to protect itself from others using that name in conducting business.

What Is "Doing Business"?

Registration of a foreign LLC is required whenever the LLC conducts business in a state. Most state statutes list the transactions that do not constitute the conduct of business in the state. While these exclusions protect an LLC from registration, they are relatively limited in scope and only include such items as:

1. Selling through independent contractors;

2. Maintaining bank accounts;

3. Owning real or personal property with no other actions;

4. Soliciting orders by mail or through personal...