Congratulations on starting your first business! Perhaps you have just formed your first LLC and now you want to figure out the best ways to grow your local business to a multistate or even multinational business. How can you properly do that without incurring needless extra taxes or additional liability? Below we will show you the best ways to expand your business:
Decide if You Need Additional LLCs
LLCs are only operational in the state they were incorporated. LLCs cannot act across state lines and have no validity in other states. Depending on the reach you want your business to have, you may think setting up another LLC in that state is the best idea. However, having two separate LLCs for the purpose of one business will double the tax liability you will owe. Each LLC is subject to that state’s taxes, and many states often impose a minimum amount of tax owed, regardless of how much revenue the LLC is bringing in.
Further, having two separate LLCs means you have separated your business into two entities. This can cause problems if you want to have one central bank account and one central payroll or business system. Having two separate LLCs may not even be necessary if your LLC was created for some small, tangential purpose to your main LLC, such as opening a bank account. Instead, you may want to look into foreign qualifications.
While the name sounds like a business with the intent to operate internationally, remember that LLCs are limited to the boundaries of the state they were incorporated. Registering a foreign LLC is crucial if you intend to open up businesses under a different state’s LLC. By law, you must register a foreign LLC if:
- Your business has property in the state and is actively conducting business;
- You have employees in that state;
- You hold meetings with clients or employees in that state; or
- You have a business license in that state.
Registering a foreign LLC means you will not have to create a new LLC in that state. Instead, foreign qualification means you are asking that state for permission to conduct business using your existing LLC. You can then use all of the business infrastructures you set up for your original LLC in the new state.
Registering a Foreign LLC
The process to register for a foreign LLC is similar to establishing a new LLC in your home state. Each state may have different requirements, but generally, a business must comply with the following:
- Conduct a name search: Determine whether your business name is taken. If it is, you may need to establish a “doing business as” (DBA) or fictitious name. It is possible for an LLC to have several DBA names. However, a DBA isn’t a business entity and doesn’t offer any legal protection.
- Appoint a registered agent: A registered agent is a person who will receive legal and other documents on behalf of your business, such as subpoenas, regulatory and tax notices, and correspondence.
- File an application for a foreign LLC: Some states require a certificate of good standing to verify that you are legally authorized to operate.
Uplift Law can assist you with LLC formation and acquiring additional FBN’s/DBA’s. We offer individualized plans to set you and your business up for long-term success. Contact us today or call us for more information. (714) 248-5612