Attorney Thomas B. Burton answers the following question:
"Do I Need to Establish an LLC in Colorado?"
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Today's question comes from Milwaukee, Wisconsin and the reader ask the following:
“Do I need to establish an LLC in Colorado? I own a business in Wisconsin and LLC which provides music lessons to students in their homes. I contract work out to individual teachers, most are considered independent contractors, some are statutory employees. I am thinking of expanding to online lessons as well, apparently learning from a teacher over the internet is popular. I live in Wisconsin and one of my Wisconsin teachers is moving to Colorado. He is interested in offering Skype or FaceTime lessons to the student who still live there. Do I need to establish a separate LLC in Colorado? The teacher will live there but the students live here.”
So this is a very interesting question involving conflicts of laws, rules between the various states and business law.
First of all, let me say that most states allow you to register an out-of-state LLC as doing business in their state as what they call a foreign entity. Wisconsin has this process and I'm not licensed in Colorado. But my guess is they have this as well. You could check with whatever office in Colorado is responsible for LLC filing. Often it's the Secretary of State's office, here in Wisconsin, it is the Wisconsin Department of Financial Institution, but I'm sure if you do a Google search about which office in Colorado handles it you could ‘Google Foreign LLC filing’ or ‘LLC filings in Colorado’ to get you going.
If your teacher is in Colorado, but only teaches students online in Wisconsin, meaning the students are only in Wisconsin, then you may not need to register your entity in Colorado at all because your business operations are still based in Wisconsin. And in that case you wouldn't have customers in Colorado.
Most states require certain what we call minimum contacts in order to bring you into the jurisdiction of their state court. So I am not sure based on these facts, if you satisfy that under Colorado law, you could discuss that with Colorado licensed attorney. However, out of an abundance of caution, my recommendation would be to look into registering your state, your LLC is an out-of-state LLC doing business in another state. Usually this is not very costly and if you think the teacher moving to Colorado may add students there, may be a good idea as well. Again, this happens frequently, but in the United States under the supremacy clause of the US Constitution, each state is required to recognize the laws of the other state.
So you can form an LLC in one state and do business in another state. You don't need to form an LLC in every state in which you do business in most Industries. There's certain highly regulated Industries where that may be the case, but again in general many businesses have their base of operations in one state and they do business in other.
So you should be able to do this as well. Good luck with your very innovative and exciting business and thank you for asking this very good question.
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