When Do You Have to Register Your LLC in More than One State?

Here’s a question that sounds easy, but is harder to answer than you might think. When Do You Register Your LLC into More than One State?

The answer, not surprisingly, is “It Depends.” Here are some of the factors that I look at in answering it:

  1. Where is the LLC located now?
  2. Where do You Live?
  3. What Activities are You Carrying on in another State?
  4. Which State are You Carrying on Other Activities?

I need to know where the LLC is now, to get a starting point. It also helps me to figure out the costs on cross-registering into other states. Most of the time I have to go back to your home state to get something called a Certificate of Existence, or a Certificate of Good Standing, which is a document issued by your home state that says your company has filed its annual report, has a current resident agent, and is in good standing. When I go to register your company into another state I need to produce the Certificate to prove your company is legally able to come in.

I also need to know where you live. That relates more to taxes. For example, did you know that California brought in some strict new rules about when companies do or don’t have to register in that state? You could have an LLC, for example, that holds property in Tennessee. You don’t do anything other than call the property manager once every 6 months to see how things are going, and check your earnings balance every now and then. But if you live in California, your activities are enough to trigger a cross-registration requirement into CA. Now you get to pay CA’s minimum franchise tax of $800/year, even though your company has nothing whatsoever to do with the state.

The activities you are carrying on in another state are also important for me. Not every state treats every little thing as creating a cross-registration requirement. Owning bare land, not developed, not earning income – well that’s often something that states give you a pass on. If you have an online business that sells from your home state in Colorado, into Kansas, you might not have to register in Kansas, even though you have lots of customers there. In Ohio, though, it will depend on how much you sell into the state. Go over a set threshold and you do have a cross-registration requirement. Other activities include storing inventory, delivering goods personally across state lines, having employees, or even independent contractors (in some cases) in other states, and so on.

Finally I want to know which state you’re active in. That helps me to figure out the costs of doing your full cross-registration. Fees differ wildly from state to state, as do processing times.

One thing you don’t want to do is ignore your cross-registration requirements. Penalties and interest could be coming your way if you do. Plus, if you get into legal trouble in that state you can’t even defend yourself properly without cross-registering into the state. That can really leave you with an expensive problem to fix!

There are many variables when you’re structuring a business. That’s why it’s hard to go through a quick-service website. Unless you talk to someone who’s got some knowledge and experience on both the tax and the legal side, it’s hard to know what you don’t know. And that can leave you vulnerable.

Got questions? Contact us! We’re here for you.

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