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 state has different rules and requirements for business operations, you may need a “foreign qualification” in each state 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 state that isn’t the state where the LLC was originally formed.
For example, if your LLC is registered in Virginia and you are looking to open a second location in Maryland, you may need to complete a foreign qualification in Maryland 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 the state of Maryland. 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 Maryland yields consequences that are far costlier than registering in the first place. If you fail to foreign qualify, your business:
To reiterate: if you do business in Maryland without foreign qualifying, there aren’t just penalties for the company, but you and your colleagues can be held personally liable. Maryland is one of the few states that impose this type of misdemeanor, so it’s best not to play with fire; foreign qualify as soon as you launch in the state.
Maryland’s Revised Statutes, Section 4A-1007 gives a more thorough description of these penalties if you’re interested.
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Maryland? Even though Maryland law is vague on the topic, in most states you are considered to be “doing business” and required to foreign qualify if:
If you’re unsure whether or not you need to file for a foreign qualification in Maryland, 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 Maryland. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
One more note on property: If you own other income-producing property in Maryland other than the types of property designated by this list, you will be considered to be doing business.
Find a more comprehensive list of exemptions in the Revised Statutes Section 4A–1009. If your sole business activities in Maryland are on this list, you most likely don’t need to foreign qualify. Nevertheless, it’s good to seek legal advice if you’re not sure.
Foreign qualification in Maryland 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 Maryland, have no fear, the process is fairly straightforward. You have two options: download and complete a paper form, or apply online.
Both options will require you to submit a Certificate of Good Standing from the state in which your LLC was formed. Contact your home state’s government to obtain one.
Often in business, efficiency is the name of the game, and filing online is the most efficient way to foreign qualify. Follow these steps, and you’ll be done in no time:
Prefer to leave a paper trail? No problem. Download the “LLC Registration Form (For non-Maryland LLC)” and complete it with the appropriate information. Then mail it, along with your Certificate of Existence and $100 payment, to:
Maryland State Department of Assessments and Taxation
Corporate Charter Division
301 W. Preston St. Room 801
Baltimore, MD 21201
The $100 fee is payable by check, made out to “State Department of Assessments and Taxation,” or if filing online, by credit/debit card. Standard processing time is up to eight weeks, but there is an option for 5-7 day expedited processing for an additional $50 fee. All online filings incur an expedited fee, as they are processed within three business days.
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 foreign qualification, and you’re embarking on another chapter in the life of your business.
You’ve done a lot of work to get your LLC ready for foreign qualification, and you wouldn’t want to get tripped up by a detail like name compliance. As a reminder, in Maryland your LLC name must:
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 up to eight weeks for Maryland to process your application. That said, if you’re in a hurry, you can upgrade to 5-7 business day processing for a $50 expedited fee.
Chances are, you’ll require at least one license or permit to operate your LLC in compliance with Maryland state law. For more information about business licenses and more in this state, check out the Maryland Business Express Licensing OneStop Portal.
Yes. Whether you operate a domestic or foreign LLC in this state, you are required to file a Maryland LLC Annual Report.
The overall costs of operating a Maryland 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 state.
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 Maryland resident agent.
The service then files your LLC Registration Form with the state to qualify your LLC to do business in Maryland.
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.
Maryland Business Resources
Foreign Qualification by State
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