When you form a Limited Liability Company (LLC), the name you choose for the LLC becomes your foreign LLC. Foreign in this sense refers to the country where the LLC is formed. An LLC that is registered in Michigan and that does business in Michigan is conducting business as a foreign LLC even if it has no or very limited activity in the state where it was established. Operating out of a state means having a bank account from that state. For most states, an LLC has to be registered with the state, the Secretary of State, and register its agent and officers with the Secretary of State as well.
On this page, you’ll learn about the following:
Types of LLCs
There are three types of LLCs. One is a general one. A general one can be run either out of a domestic location (in the case of a limited liability company) or out of a domestic state (in the case of a corporation). Another is a limited liability company formed in one state and used for transactions in another state. The third type is a foreign LLC. A foreign LLC has been established by forming a corporation (an offshore corporation) in one state and using that corporation’s address in another state.
Foreign LLCs Considerations
A few states allow an individual to form a foreign LLC at the same time that he or she forms a domestic LLC. Most experts recommend that individuals consider both options. Forming a foreign LLC while still in a domestic LLC is often a good idea. This permits the individual to change his or her address, change his or her corporation’s address and gain access to his or her funds from those same states where he or she formed his or her domestic LLC. However, it may also give the appearance of an intent to defraud the IRS by moving assets to locations within the state he or she formed his or her LLC in.
Limited liability companies are known as “pass-through” businesses because they incorporate in the name of a person or entity and use that person’s personal financial resources to conduct business. Individuals may use the funds generated from the business to finance their personal activities. Domestic corporations use their corporate funds to conduct business. If a domestic corporation is created, all owners must typically live in that state to retain ownership of the corporation. Thus, if the business is conducted out of state, the company cannot obtain a pass-through corporate shield.
Unlike pass-throughs, a limited liability company can incorporate in either state. For example, a corporation could open an office in the state of New York and incorporate in the state of Texas. However, a foreign LLC will not be able to incorporate in either state because doing so would require the formation of a new corporation in each state.
Starting a Foreign LLC
In order to start a foreign LLC, you will have to submit a registration form for your business in its home state. This is also true for domestic LLCs. The IRS provides examples of paperwork required for a foreign lc registration process on its website. Once you submit your registration form, you will need to pay taxes and submit other documents to the state tax authority. Your accountant will help you with this process if he or she is not an attorney.
Limited liability companies are not “real” businesses. While it is possible for one to file articles of incorporation with the state in which he or she resides, most individuals prefer to form a foreign limited liability company instead. A foreign LLC does not have to register its domain in its home state. Businesses can, however, incorporate in the state in which they conduct business, and have their shareholders meet in that state to do business. If a foreign LLC does not meet the requirements for filing a ” fictitious “class” name, it cannot use that name on its web site.
The US requires that all LLCs register in its state before they can operate. Foreign LLCs can avoid some of these state requirements by conducting business through a bank account. A Foreign Limited Liability Company can open a bank account by seeking a license from the department of the treasury. The license application can be downloaded from the website address provided below.