Do you want to expand an existing LLC into District of Columbia (DC) with a foreign qualification, but you’re not familiar with the process?
This guide will outline important details when expanding your business and explain how to foreign qualify an LLC in District of Columbia (DC).
Your business is growing, and you’re planning an expansion to other states. It’s a good problem to have!
But it’s not quite as simple as choosing another location. Because each jurisdiction has different rules and requirements for business operations, you may need a “foreign qualification” in each jurisdiction where you plan to do business.
It’s a common misconception that foreign qualification is only for businesses operating outside the U.S. But in this case, “foreign” refers to any business operating in a jurisdiction that isn’t the state where the LLC was originally formed.
For example, if your LLC is registered in Maryland and you are looking to open a second location in D.C., you may need to complete a foreign qualification in D.C. before you can expand there.
Important Note: If you’d like to save time and have the foreign qualification paperwork taken care of for you, many of the best LLC services can handle this task for you.
Foreign qualifying is essentially asking permission to do business in D.C. And the notion that “it’s easier to ask forgiveness than permission” doesn’t apply here. Failing to foreign qualify before starting a business in D.C. yields consequences that are far costlier than registering in the first place. If you fail to foreign qualify, your business:
Let’s take a look at some of those fees. The Foreign Registration Statement fee, for example, is $220, an Amendment Statement is another $220, and the Biennial Report is $300 with a $100 late fee. If your LLC does business in D.C. without registering for multiple years, these fees can pile up quickly.
But being caught doing business without registering doesn’t completely halt all of your activities in D.C. For example, it won’t invalidate any of your current contracts or preclude you from defending an action or proceeding in D.C. courts.
D.C. Code § 29–105.02 has additional details. Check it out here.
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in D.C.? D.C. law defines it as “Any trade, profession, or activity which provides, or holds itself out to provide, goods or services to the general public or to any portion of the general public, for hire or compensation in the District of Columbia.” You’ll notice a lack of specifics, but we know from other state and tax laws that generally you are considered to be “doing business” and required to foreign qualify if:
Depending on how your LLC is structured, it could also be subject to a D.C. franchise tax. Foreign qualifying in D.C. lets the District know that you could be subject to this tax. If you don’t foreign qualify, you may be liable to pay it, plus late fees, in the future. To learn more about D.C. franchise taxes, take a look at the Office of Tax and Revenue website. It’s important to always stay on top of your LLC’s taxation requirements to avoid any unwelcome surprises.
If you’re unsure whether or not you need to file for a foreign qualification in D.C., we suggest seeking legal counsel.
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in D.C. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
While checking this list, if you find your only business activities in D.C., you’re likely off the hook for foreign qualification. However, it would be wise to also examine the more detailed list under D.C. Code § 29–105.05. Unsure about it? It’s best to seek legal counsel rather than risk the consequences of not registering.
Foreign qualification in D.C. is simple if you know where to find and send your forms. If you or your legal counsel has decided to foreign qualify your LLC in D.C., you will need to either complete form FN-1: Foreign Registration Statement or apply online through the CorpOnline web portal. Both are available on the D.C. Department of Consumer and Regulatory Affairs (DCRA) website.
Filing online is typically the faster and easier option. Just register for an account, find the correct form, and input the necessary information. The DCRA will receive your information right away and begin processing your request.
It’s you prefer working with hard copies, that’s fine too! Download and complete the FN-1 form and send it to:
Department of Consumer and Regulatory Affairs
PO Box 92300
Washington, DC 20090
Important note: Make sure to fill out the form electronically. The DCRA will not accept any handwritten forms.
Along with your paper or online form, the District will need an original Certificate of Good Standing (or Certificate of Existence) from the state where you initially formed your LLC. This certificate can be no more than 90 days old. Contact the state government to request it.
Foreign qualifying in D.C. is going to run you $220 whether your file online or by mail. Pay with a credit/debit card online or with a check (payable to “D.C. Treasurer”) accompanying your FN-1. Typical DCRA processing times for online and mailed documents are 15 days after receipt.
After your form is in and your fee is paid, sit back, take a deep breath, and pat yourself on the back. Your LLC is on its way to being foreign qualified and you’re embarking on another chapter in the life of your business.
Each jurisdiction has its own rules for business entity names, and D.C. is no different. As you go through the foreign qualification process, don’t forget to confirm your name’s compliance. In D.C. your LLC name must:
Find more info on naming requirements in the D.C. Code § 29–103.02.
We think you should foreign qualify your LLC before you begin conducting business in a new state. If you don’t, your business could be subject to a broad range of fines and penalties for operating an LLC in a jurisdiction where you don’t have permission to do so.
You’ll typically need to wait roughly 15 business days for the District of Columbia to process your foreign qualification paperwork. The exception is if you opt for expedited processing, which is available for an additional $100 (one-day service) or $50 (three-day service).
Chances are, you’ll require at least one license or permit to operate your LLC in compliance with District of Columbia law. For more information about business licenses in this district, check out D.C.’s Registration and Licensing Services for Businesses page.
Yes. Whether you operate a domestic or foreign LLC in the District of Columbia, you are required to file a D.C. LLC biennial report.
The overall costs of operating a D.C. LLC can vary considerably based on the specifics of your business. However, we created a helpful guide to help you identify and plan for every expense your LLC will face in this jurisdiction.
The answer to this question lies in your personal preferences, but we can give some general pointers. An attorney will cost the most by a mile, but also provides expertise you won’t find with the other options. The DIY route is free of charge but can require quite a bit of legwork and provides no peace of mind that the process is being completed correctly.
Using an LLC service means your business will be foreign qualified by professionals who know what they’re doing, while also costing significantly less than a lawyer. This “best of both worlds” attribute is what makes LLC services our preferred option.
Using an online LLC service removes much of the hassle from the foreign qualification process. With these services, all you need to do is provide them with the name, location, and industry your business operates in, along with some info about yourself and your D.C. registered agent.
The service then registers your Foreign Registration Statement with the state to qualify your LLC to do business in D.C.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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