Do you want to expand an existing LLC into Michigan 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 Michigan.
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 Wisconsin and you are looking to open a second location in Michigan, you may need to complete a foreign qualification in Michigan 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 Michigan. 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 Michigan yields consequences that are far costlier than registering in the first place. If you fail to foreign qualify, your business:
So, if your LLC transacts business in Michigan without authorization, not only can the company itself be charged, but you might end up personally owing the state $10,000 as well. And so might each of your associates. That’s not even considering all the taxes and fees, including late fees, you would have to backpay. It’s a lot to risk, especially considering the fee for foreign qualification is only $50, so it’s best just to register your business and have peace of mind.
The state’s penalties, however, don’t include invalidating your current contracts or preventing you from defending a legal proceeding.
Want to learn more? The Michigan LLC Act, Section 450.5007 provides additional details on these penalties.
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Michigan? Unfortunately, the state’s LLC Act doesn’t call out any specifics. However, other state and tax laws say that you are considered to be “doing business” and required to foreign qualify if:
Of course, there are always taxes to consider too. Your LLC may be required to pay certain business-specific taxes in Michigan, depending on how it’s structured. Foreign qualification is what notifies the state about your tax status. Sure, it’s enticing to save money by avoiding these taxes, but this could lead to bigger penalties in the future, so you should register as soon as you begin doing business. 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 Michigan, 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 Michigan. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
Be sure to check out the source material, Michigan’s LLC Act, Section 450.5008, for more in-depth descriptions of these exemptions. Cross-check your business activities in Michigan with these lists, and if you find them all present, you’re likely free from foreign qualifying. But if you have any hesitations, it’s best to seek legal counsel.
Foreign qualification in Michigan 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 Michigan, you will need to submit Form CSCL/CD-760: Application for Certificate of Authority to Transact Business in Michigan. While its title lacks brevity, the content does not. Here’s all the information you’ll need to complete it:
The form’s third page contains in-depth, step-by-step instructions on how to fill it out.
Along with your completed form, you are required to submit a Certificate of Good Standing from the state where your LLC was formed. To obtain one, contact your home state government.
You’re almost there! All that’s left is to submit your documents. You can mail them – along with a check or money order made out to the “State of Michigan” – to:
Michigan Department of Licensing and Regulatory Affairs
Corporations, Securities & Commercial Licensing Bureau
P.O. Box 30054
Lansing, Michigan 48909
If you happen to live near Lansing and want to get out of the house or office, you can also drop off your form at 2407 N Grand River Ave., Lansing, Michigan. In person, you can pay your fee with a check, money order, or credit card.
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.
Before you submit your paperwork, double-check to confirm that your real or assumed LLC name follows Michigan’s specific business name rules. You wouldn’t want your application held up because of a naming issue. Your LLC name must:
You can also reserve your Michigan business name if you’re not quite ready to foreign qualify your LLC. For more information regarding these naming rules, see the Michigan LLC Act, Section 450.4204.
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 two weeks for Michigan to process your application from the date of receipt. If you need your foreign qualification faster, the state does offer affordable expedited services, starting at just $50 for 24-hour service.
Chances are, you’ll require at least one license or permit to operate your LLC in compliance with Michigan state law. For more information about business licenses and more in this state, check out Michigan’s convenient online state license search tool.
Yes. Whether you operate a domestic or foreign LLC in this state, you are required to file a Michigan LLC Annual Statement.
The overall costs of operating a Michigan 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 Michigan resident agent.
The service then registers your Application for Certificate of Authority with the state to qualify your LLC to do business in Michigan.
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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