Do you want to expand an existing LLC into Massachusetts 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 Massachusetts.
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 Connecticut and you are looking to open a second location in Massachusetts, you may need to complete a foreign qualification in Massachusetts 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 Massachusetts. 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 Massachusetts yields consequences that are far costlier than registering in the first place.
If you fail to foreign qualify, your business will no longer be allowed to maintain or commence an action or lawsuit in Massachusetts courts. On top of that, the LLC will be subject to a civil penalty of $500 for each year that it’s been doing business in the state without foreign qualifying.
Despite these penalties, conducting business in Massachusetts without proper authorization will not prevent your LLC from defending a lawsuit in the state, nor will it cancel or invalidate any ongoing business contracts. Further, individual members and managers cannot be held personally liable.
But it’s simply not worth the risk. The foreign qualification fee – $500 – might seem steep, but you’d be charged at least that much (and probably a lot more) if caught doing business without authorization. It’s best just to register with the state as soon as you start doing business.
To read what the Massachusetts General Laws have to say on the subject, see Section 54.
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Massachusetts? Look to the state’s LLC Act, and you’ll find a lack of specifics on “doing business.” However, other state and tax laws tell us that you are considered to be “doing business” in most states and required to foreign qualify if:
Since LLCs can be organized and classified in different ways for taxation, you may also owe certain LLC taxes in Massachusetts, and foreign qualifying would let the state know about your status. While it might be tempting to avoid these taxes by flying under the radar, this could lead to even more penalties in the future. 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 Massachusetts, 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 Massachusetts. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
See your only business activities in Massachusetts here? If so, you’re most likely off the hook with foreign qualification. It’s a good idea to glance over the state’s General Laws, Section 15.01, as it outlines these exemptions in greater detail.
Foreign qualification in Massachusetts 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 Massachusetts, this form is going to be your best friend. It’s the one and only method for registering with the state as a foreign LLC.
Download and print the “Foreign LLC Application for Registration” and fill it out using Adobe Acrobat or a similar program (the Secretary of the Commonwealth’s office won’t accept handwritten forms). Here’s the information you’ll need:
Finished your form? Don’t mail or fax it just yet. There are a couple more documents that need to accompany it:
For mail or walk-in filings, you can send or deliver your documents to:
Secretary of the Commonwealth
One Ashburton Place, Room 1717
Boston, Massachusetts 02108-1512
Processing times for the Secretary of the Commonwealth’s office are fairly quick. Mailed applications are processed 3-5 business days after receipt, walk-in applications 1-2 days, and faxes within 24 hours.
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.
Keep in mind that each state has its own rules about business names. As you expand to different states, it’s important to confirm that your real or alternate name complies with those rules. In Massachusetts, 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 roughly 3-5 business days after receipt for Massachusetts to process a mailed application. Faxed documents are usually processed within 24 hours and walked-in forms take roughly 1-2 business days.
Chances are, you’ll require at least one license or permit to operate your LLC in compliance with Massachusetts state law. For more information about business licenses and more in this state, check out the state’s Business Licenses and Permits webpage.
Yes. Whether you operate a domestic or foreign LLC in this state, you are required to file a Massachusetts LLC Annual Report.
The overall costs of operating a Massachusetts 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 Massachusetts resident agent.
The service then files your Application for Registration with the state to qualify your LLC to do business in Massachusetts.
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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