If you or your spouse are in the military, constantly moving around already has enough challenges. And once you get settled, you’re not 100% sure how long you’ll be there and when the next PCS (Permanent Change of Station) order comes through.
Balancing the move, family life, car registration, and taxes are enough; and now this LLC confusion. What the heck!
I empathize with you so much here. Not only are you and your family making a serious commitment to our country, but you have to deal with all the ambiguity and uncertainty around the common question, “Where should I form an LLC if I and/or my spouse are in the military?”
Let’s take a look at this message from Robert:
“As a member of the military, if I create an LLC, would I need to dissolve my LLC and create a new one in each state I move? I don’t keep an address in a state but I do plan to keep my state (Florida) as my “Legal residence”… but again, I have to move every couple of years. How would it work in that scenario?”
Domestic LLC and Foreign LLC
Robert is asking, if every time he moves, does he need to shut down his old LLC (known as Dissolution), and form a new LLC.
When “LLCs move state”, there are two basic ways (excluding redomestication) to do it:
- Dissolve the LLC in the old state, then form an LLC in the new state.
- File a Foreign LLC Registration, allowing the existing LLC to operate within the new state’s borders.
Robert’s question does not mention option #2, most likely because he wasn’t aware of Foreign LLCs.
Based on Robert’s question, we would recommend going with option #2 (Foreign Registration).
This allows the original LLC to operate within new states where Robert moves, and he can keep the same EIN/Federal Tax ID Number and bank account.
The Basics of Foreign LLCs:
First, LLCs can only be formed on the state-level (not on a federal/national level). Therefore, LLC laws are written and enforced on a state-by-state basis (each of the 50 States, as well as Washington D.C., have LLC Acts or Statutes). And an LLC just can’t operate anywhere it pleases, without first registering in a new state.
Wherever the LLC is originally formed is known as the “home state”, and the LLC is known as a Domestic LLC in that state. If you want your LLC to operate and do business in a new state, you must file Foreign LLC registration documents (and pay a filing fee) in the new state.
If you’re in the military and constantly moving around, you can see how this can quickly become a major pain in the ass!
“So What’s the Best State?”
Yes, I can hear you saying, “I get it, I get it… so what’s the best state?”
We recommend forming the LLC in the state you use as your legal residence and/or the state where you have the most “context”. By context, we mean familiarity, a street address (where someone can get your mail), family and friends.
In Robert’s situation, that means he’d form a Florida LLC and if he moves to Arizona for an extended period of time, he’d register his Florida LLC as a Foreign LLC in Arizona. He’d continually register his Florida LLC as a Foreign LLC in all the states he lives long-term.
And yes, unfortunately, this can get a little expensive… but operating illegally and without authorization within a state’s borders carries with it risks:
- You may be denied access to the court system, which eliminates your ability to bring suit.
- The state in which you are illegally doing business in has the ability to slap you with fines and penalties.
- In many states, there is a chance you can lose the liability protection of the LLC and be held personally responsible for actions, which can expose your personal assets.
“What if I Don’t File a Foreign LLC Registration in Each New State?”
Situations may arise where you might only live in, say Arizona, for 3 months. And you’re asking, “Is is really worth the hassle of the Foreign LLC qualification every time?”
There aren’t “LLC police” checking up on you on a weekly basis, so there is a chance you can get away with not registering as a Foreign LLC. But again, there are risks, and we recommend speaking with an attorney if you’re not sure what constitutes “doing business” (doing business in a state is what legally triggers the requirement for Foreign LLC registration).
And although there are no “LLC police”, there are internal compliance departments within each state’s Department of Revenue and Secretary of State’s Office. If you need to consult with an attorney, a service and recommend is Avvo.
If you need to form an LLC in your home state, check out our free LLC guides.
If you need to register your LLC as a Foreign LLC in another state, please see the state resources below.
Documents and Fees for Foreign LLC Registration
– There are additional steps and fees for Foreign LLCs. The forms and information below is just for registration/qualification.
– Most states will require a Certificate of Authority, Certificate of Good Standing, or a similar document from your existing state before approving your Foreign LLC application.
– The prices below are subject to change by the states, so please make sure to call each state and double-check on fees.
– Foreign LLCs are subject to Annual Reporting requirements.
For a full list of Foreign LLC registration fees by state, please see this table:
Foreign LLC Registration Fees for all 50 States