What Is a Foreign Limited Liability Company?

What Is a Foreign Limited Liability Company?

by Belle Wong, J.D., January 2016

What is a foreign limited liability company? You may have heard the term "foreign limited liability company" before, but in the case of foreign LLCs the term "foreign" doesn't have anything to do with what usually jumps to mind when one thinks of the word "foreign.” While most people instantly think of "foreign" as meaning "from outside of the United States," when it comes to limited liability companies, "foreign" doesn't have the same meaning.

So, what is a foreign LLC? In the context of limited liability companies or LLCs, "foreign" doesn't mean an LLC that's been formed or registered outside of the country. In fact, since a limited liability company is a creature of U.S. state legislation, a foreign company or foreign business that was formed outside of the U.S. wouldn't be called a limited liability company; instead, it would use whatever form of business organization it registered as in its country of origin.

From the perspective of a state in which an out-of-state LLC wishes to carry on business, when reference is made to a foreign limited liability company it means an LLC in another state; that is, an LLC that carries on business or plans to carry on business in a different state. If an LLC has been formed in a state and carries on business in that state, from the perspective of that state it's known as a domestic LLC.

Foreign LLC Registration

Registration and filing. When a limited liability company that's been formed in one state wishes to carry on business in another state, in the eyes of that other state it's a foreign limited liability company, and as such has to register with the other state in order to carry on business there.

The foreign LLC registration process itself in most states is very similar to the registration process for a domestic LLC; when forming an LLC or starting an LLC in a state, you must file a registration form accompanied by filing fee, and it's much the same process for a foreign LLC. However, in most states a foreign LLC registration form is different from the one you would fill out and file for a domestic LLC registration so when registering an LLC as a foreign LLC, the correct form is the one that applies to foreign LLCs specifically.

Exemptions to registration requirement. If you have plans to carry on business with your LLC in another state outside of the state in which your LLC was formed, will you need to file a foreign LLC registration? In most cases, the answer is yes, but depending on the state in which you wish to carry on business, there may be exemptions to this requirement.

For example, the state of Texas requires a foreign LLC to register if it intends to "transact business" in Texas, and while Texas legislation doesn't define what is meant by "transacting business", legislation does provide a list of fifteen activities which do not qualify as "transacting business.”

Since different states have different exemptions, It's best to consult with an attorney based in the state in which you wish to do business to see if the business you will be conducting falls within any of the exemptions allowed in that state.

Fees and costs. As with filing a traditional LLC registration, you'll be required to submit a filing fee when registering a foreign LLC. Again, the amount of the filing fee varies from state to state, but it's important to know that many states do charge a higher fee for foreign LLC registrations than they do for domestic LLC registrations. This might also apply when it comes to annual renewal fees as well, so if you're working within a budget, these costs may have more of an impact than you expected. If you don’t file for foreign qualification, the other state could hit you with stiff penalties, fees, and other costs but most importantly, you won’t be able to easily defend yourself in that state’s court system should you be sued.

LegalZoom can help you get the paperwork you need to foreign qualify a company. Complete our simple online questionnaire, and we'll help you complete the necessary paperwork and file it with the Secretary of State or other state agency.