For most people wanting to start a business, one of the first concerns that come to mind is the business’s location. You may have an amazing idea for a business, but if the area is not favorable, there is always the risk of your business not progressing as you imagined it. Picking the best location to set up your business is a make or break move.

However, the more important question is what if you want to set up a business in another state other than where you live in? Will that even be possible and legal? In this article, we will dig deep into the possibility of forming an LLC in other states aside from your hometown.

Domestic and Foreign LLC

Before you jump in and try to find out how much does a LLC cost in Arizona in your attempt to set up a business there while living elsewhere, you must first understand what is a domestic and foreign LLC. 

To keep it simple, if you register your LLC in a state where you will be doing business, you are registering a domestic LLC. Meanwhile, suppose, for example, you have an Iowa address but want to do business in Arizona, you need to register your business as a foreign business (LLC or corporation) in that state.

Registering for a foreign LLC happens in cases like doing business transactions in multiple states or if you’re aiming to expand your business to other states. Here are more scenarios that would call for a foreign LLC registration.

Scenario 1:

Suppose you have a restaurant in Florida and decide to expand into Georgia and South Carolina. Doing business there will require a foreign qualification in both Georgia and South Carolina.

Scenario 2:

A business formed a Delaware LLC, but is physically located in New York, will also need a foreign qualification to operate business in New York legally.

Scenario 3:

If you formed your company in Washington, but your business partner has been transacting with the bulk of your clients near his home in California. This will require a foreign qualification in California.

Foreign Qualification

For all the scenarios presented, they require registering a business in a state other than the one in which you formed your business which is referred to as foreign qualification. You should seek an attorney or accountant’s advice if you are uncertain if your business needs a foreign qualification.

Accurately registering your business in the state in which it operates is a legal obligation. In case you fail to do so, this can result in fines and interest fees for anytime you’ve done business when you were not foreign qualified. Additionally, you will be facing liability in back taxes and also will never be allowed the possibility to sue the state you are not registered in.

Conclusion

Forming a business is not something that will restrict you from exploring other possible locations where your business can thrive. However, to ensure that you are allowed to legally operate in the state where you desire to do your business, knowledge regarding foreign LLC and how to register for it is a must.