What Is a Foreign Limited Liability Company

Foreign limited liability companies are considered business entities that are formed in one state, yet operate in another. Domestic LLCSs are those who form and operate within their residing state. Larissa Bodniowycz provides insight to forming a foreign LLC and states the potential to fulfill “obligations to each state where it does business” (Bodniowycz, 2020). 

Common obligations in both states would include a registration process and paying taxes in the foreign state. Additionally, there are costs associated to the formation process for both foreign and domestic states. Deciding whether to form a foreign or domestic LLC is dependent on several factors relevant to the individual’s circumstances. For example, these could include possible tax break benefits or starting a business in one location with the goal to expand on a more global scale in the future. 

However, entrepreneurs need to carefully critique the benefits and drawbacks to both options and decide what will be most advantageous for their company in the long run. There are certain exceptions that could potentially allow an LLC to be “exempt from registering as a foreign LLC or paying state taxes in limited circumstances” (Bodniowycz, 2020).

 If a foreign LLC is more fitting, the business individual needs to ensure they follow all necessary and required procedures during the formation. They will be required to select and retain a “registered agent” in the foreign territory. This individual will be responsible for accepting legal documents and handling other matters on behalf of the business in the foreign state.

References:

Bodniowycz, J.D., L. (2020). What Is a Foreign Limited Liability Company?. Retrieved from https://info.legalzoom.com/article/what-foreign-limited-liability-company