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 Maryland and you are looking to open a second location in Virginia, you may need to complete a foreign qualification in Virginia 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 Commonwealth of Virginia. 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 Virginia yields consequences that are far costlier than registering in the first place. If you fail to foreign qualify, your business:
So, if your LLC conducts business without foreign qualifying, not only will you lose some legal rights and potentially your revenue stream, but you and your colleagues will also be held personally liable. Foreign qualification isn’t the most exciting way to spend your time, but it’s well worth avoiding these penalties.
That said, conducting business without a foreign qualification will not cancel any of your current contracts, nor will it prohibit you from defending a lawsuit in Virginia courts.
Interested in hearing straight from the source? Take a look at Virginia Code, Section 13.1-1057.
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Virginia? Unfortunately, Virginia’s LLC Act doesn’t give a clear answer. However, tax laws tell us that you are considered to be “doing business” in most states and required to foreign qualify if:
If you’re unsure whether or not you need to file for a foreign qualification in Virginia, 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 Virginia. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
Find a complete list of these exemptions in the Virginia Code, Section 13.1-1059. If you find all of your LLC’s activities in Virginia here, you’re likely not required to foreign qualify. Still, if you’re at all unsure, it’s best to check with an attorney.
Foreign qualification in Virginia 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 Virginia, you need to get your hands on Form LLC-1052. The fastest and easiest option is to submit this particular form online, but if you’d rather use a paper form, you can download it and fill it out with the following information:
Finished? Don’t file it yet! The State Corporation Commission also needs a Certificate of Good Standing from your LLC’s home state. Plus, the application fee is $100, which you can pay via check (payable to the “State Corporation Commission”).
Compile both of these items with your completed form and send them to:
Clerk of the State Corporation Commission
P.O. Box 1197
Richmond, Virginia 23218-1197
The SCC’s average processing time for foreign qualifications is 8-11 business days. But if you’re in a hurry, you can receive expedited service for online orders only: $100 for next-day service or $200 for same-day service.
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.
Expanding to a new state is exciting, but in all that excitement, make sure to check over the little details, like confirming that your business name follows Virginia’s naming requirements. According to the LLC Act, your name must:
You can also reserve your Virginia business name if you’re not quite ready to foreign qualify your LLC.
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 8-11 business days for Virginia to process your documents. However, you can purchase expedited service upgrades for $100 (next-day) or $200 (same-day).
Chances are, you’ll require at least one license or permit to operate your LLC in compliance with Virginia state law. For more information about business licenses and more in this state, check out Virginia’s convenient Licenses webpage.
Yes. Whether you operate a domestic or foreign LLC in this state, you are required to file a Virginia LLC Annual Report.
The overall costs of operating a Virginia 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 Virginia registered agent.
The service then files your Application for Certificate of Registration with the state to qualify your LLC to do business in Virginia.
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.
Virginia Business Resources
Foreign Qualification by State
Ready to Start Your LLC?