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Do I Need an LLC in Every State?

Attorney Thomas B. Burton answers the following question:

"Do I Need an LLC in Every State?"


LLC or Limited Liability Company is a business entity owned and controlled by LLC members, who may run their company without oversight from a corporate board of directors. There are certain requirements for an LLC or Limited Liability Company formation and people often gets confused regarding if they are required to have an LLC in Every State. Attorney Thomas B. Burton discusses different LLCs, the requirements and the need of an LLC in every state in this latest Question and Answer Series Video.


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Welcome back, I'm Attorney Thomas Burton and today's question comes from the YouTube channel itself, a viewer commented on one of our LLC videos and asked the following and I thought it would be a good example for other viewers to answer this question on the channel, in its own video.


Here it is - "If I live and have an LLC in California but also work and do transactions deals in other states such as New York, Florida, Ohio, Texas and Kansas, does that mean I need to get an LLC for each of those states as well? A total of five or more LLC or will my California LLC suffice for those five states I just mentioned?"


That's the question on the YouTube channel and thank you for submitting it and in general, you don't have to form an LLC in every state in which you do business. It sounds like you have an LLC in California and just as a reminder, I'm licensed here in Wisconsin, so I'm only talking, I could only talk about Wisconsin law but talking about LLC's in general, we have 50 states, each state has their LLC law. So if you have a valid LLC in California, that means you are licensed to do business, you're set up to do business in California.


Now because we're all part of one country, you can do business with other states as interstate commerce. However, some states require you to register as what's called a 'Foreign LLC', if you're going to do business, transact business in their state. So in your example, I don't know what line of business you're in, in some instances, it could make sense for you to open a completely different LLC in that state and then have like a corporate parent own all the LLC's but in other instances, it would probably be cleaner to just register your LLC, your California LLC, as a Foreign LLC what's called Foreign LLC, it doesn't mean foreign country, it just means foreign state as in a different state, register the LLC to do business.


Now I'm not licensed in New York, Florida, Ohio, Texas and Kansas, so the thing is you're going to need to examine the laws of each jurisdiction and see if the business you're doing triggers the requirement to register as a Foreign LLC in those states and generally, what they want you to do is file the registration and usually name a registered agent in the state for service of process.


Let's look really quick here at Florida, just for example, this is northwest registered agent, I don't have a relationship with them but they're a registered agent service and they just have this post about how you would do it in Florida.


Like here it says - foreign LLCs are LLC's that were formed in one state or jurisdiction but want to expand their operations to another state. Florida state statutes don't clearly define what counts as "Doing business", but in general, an LLC can reasonably assume is doing business in another state, if it has a physical address, storefront, warehouse or presence in the state, has sales or offers services in the state, pays employees in the state, owns any assets in the state.


Again, this, I've seen this with multiple jurisdictions, this definition of doing business vary state to state but the more frequent contacts you have inside a state, there's a case called 'Minimum contacts international shoe', in law school for jurisdiction, for determining jurisdiction in a lawsuit but a factor there as well is do you have a physical presence in the state and so if you're opening physical offices in any state, you're likely going to trigger, from what I've seen this doing business.


Now if you're just doing an isolated, one-time sale like over the internet, that might not require it but systemic and frequent contact, so take a look at this, Florida, we'll just use Florida as example because you mentioned it, they charge a $100 filing fee and a $25 fee for the registered agent to register as a Foreign LLC.


You don't have to form another new LLC, you just register in your example, your California LLC but if you are required to file, then you need the Florida registered agent, who will be responsible for receiving service of process and then, you can get this certificate of good standing from Florida and then complete that application to transact business for $125.


This is what Florida requires here. You could work with an attorney in Florida to do this or there's services like this where you could register your LLC yourself but again, if I was you, I would examine whether it's required in each of the five states you mentioned before deciding if you should register as a Foreign LLC. Again, your other option would be to create a new LLC in that state but then you would have to maintain that entity as its separate LLC for the business you're doing in in that state, you would still need the registered agent and such.


Let's look here, they talk a little bit about what does it mean to do business in Florida, activities like maintaining a bank account, securing debts, collecting mortgages and other isolated transactions within the state, do not constitute transacting business and then they have some common examples that do not count as engaging in business, that do count, maintaining an office, owning or renting, personal property, assembling or repairing products, delivering goods to customers using company owned truck, hiring employees or agents. So and then if you want to look, this is the statute they cite right there and again, I'm not licensed in Florida, just showing you the statute and it mentions those activities, maintaining accountant, financial institutions, transacting business in interstate commerce is excluded, conducting an isolated transaction that is completed within 30 days and is not won in the course of repeated transactions of a like nature.


So there's these exceptions for sort of one-off sales or transactions.


Just showing you with this Florida example and then you can check out this article to northwest registered agent, what constitutes doing business and do they need a registered agent for every state where they're sort of doing business, the short answer is you need a registered agent in any state which you are officially doing business, however whether or not having employees and contractors in the state count is doing business is a little murkier.


So read through this article because it mentions California, how they define it, if you want that in English, doing business is essentially a legal term that means your company has established a sufficient financial foothold in the state's business market either through owning or leasing property, having employees in a state or having a regular physical presence in that state, in the form of a storefront, office or warehouse.


That's how they define it here and then they use this four-factor tests, does the foreign entity pay state taxes, does the foreign entity maintain a physical presence, does the foreign entity have contracts in the state, are its management functions in the state, widespread?


And then they talk about some that have safe harbor provisions and here you see New York, Kansas, Florida and Nebraska, all allow for an out-of-state business to set a lawsuit or have an in-state bank account.


Just because you're providing services or products to customers in a state other than the one your business is registered, it doesn't necessarily mean, you'll need to file for foreign qualification.


They give this example of a trucking company based in one state that transports goods from one state to another. The trucking company is engaged in interstate business and therefore it does not need to foreign, qualify in each state it passes through or makes delivery too. Although trucking companies may still need a registered agent service.


The same laws would also apply to a consulting firm that does work for clients in multiple states. Just because the consulting firm is making money from clients in other states, doesn't mean that it is transacting business there, both the trucking company and the consulting firm make money from customers in other states but until they set up settle locations in other states, they are typically exempt from having to form qualify.


That's a short answer but what they say is what this all means is to avoid potential fines and unexpected tactics, is a good idea for business owners to investigate estates policies with regards to exempt business activities that do not require foreign qualification.


I would check out their blog posts and you can think about if you're doing, what your business is doing and if you're doing any of these big ones listed, that's a good indicator you might need to foreign qualify and if you feel you fall more under these isolate transactions, you might not need to.


Again, consult with a lawyer in those states, if you need a definitive answer and if you can also do your own research on this just like I'm showing you here.


One more blog post here is just they talk about how and they mentioned California, that the model rules, a lot of states have adopted the model rules and you'll see like in the Florida statute, some of these same repeated like that transacting any business in interstate commerce, we see it there as a subsection I in the Florida statute.


You can check your five states, if they've all adopted the model rules then maybe your analysis will be more similar but they point out that California adopts the model rules with these modifications, transacting business in interstate commerce is not an excluded activity.


In your question, you already have the California LLC, so you're covered for there but these other states, I would say you should run through this analysis and they say about California in assessing whether to qualify, it's important to consider that California is one of 11 states where liability for failing to qualify may be imposed not only on the corporate entity but on individuals acting on its behalf. In this blog too, you can see it's this address up here, they talk about Texas and New York as two of the other big states and they talk about because I see you mentioned New York in your question, in New York whether a corporation conducts systemic and regular business in the state is an important factor in determining whether it must qualify.


Going back to your original question here and I'm just going to go back on camera at the end, thank you for submitting it. You can see, unfortunately this is a classic lawyer answer of 'it depends' but the short answer to your question is, you have an LLC in your primary state and now your analysis is centering around whether you need to register as a foreign LLC in certain other states. So I don't necessarily think you need to make five more LLCs, unless the volume of your business in each of those states is enough that you feel maybe it's smarter to just do a domestic LLC, meaning registered under the state laws of that state, in each state and run the business activities through, for example, all the transactions in New York would run through the New York LLC, all the Florida in Florida, all the Ohio in Ohio, etc. but that can be a lot of LLC's to maintain, so you'll have to decide if it's worth the time and expense and having the separate bank accounts for each and things like that and if not, generally, it's cheaper to use your California LLC and register as a foreign LLC in the states where it would be required but again, you need to perform that analysis to see if you're required to register as a foreign LLC.


Today I just wanted, for everyone watching to focus on this foreign LLC concept because the first time I heard it, it sounds like foreign LLC, you're thinking it means like an LLC formed in a foreign country like the United Kingdom for example. I'm not even sure if they have an LLC but it actually just means formed in another state and we use that term 'Foreign LLC' meaning like your example, a California LLC doing business in Wisconsin, might need to register as a foreign LLC in Wisconsin.


That's a long, a bit of a long answer to a short question but I think you're going to have to do some analysis on your own about this because you know, what type of business you're doing and if you need help, I would consult with a lawyer in licensed, in the state you're looking at the question about for help running through the analysis under the law of that state and what they define as transacting business, doing business in the state.


I hope that's helpful to you. Thank you for the question, thanks for asking, thanks for tuning in and we'll see you next time.


© 2023 Burton Law LLC. All Rights Reserved. Transcript and captions provided for ease of access for the hearing impaired. For questions about this topic, or to suggest a topic for a future blog post, please contact the office.

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