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When most people hear the word “Foreign LLC” they usually think this is an LLC formed outside of the United States. This is not the case. A Foreign LLC still refers to an entity created in the United States.
What is a Foreign LLC?
A Foreign LLC is an LLC that was formed in one state, but has registered (also referred to as “qualifying”) to do business in another state.
For example, if you form an LLC in Florida (by filing an Articles of Organization), but wish to expand your operations to Georgia, you need to register your Florida LLC as a Foreign LLC in Georgia.
This is accomplished by filing an Application for Certificate of Authority for Foreign Limited Liability Company (with the Georgia Secretary of State).
The term “foreign” simply means that the LLC is foreign to Georgia (since Georgia and Florida are different jurisdictions).
Does Foreign LLC mean it’s owned by a foreigner?
The term “Foreign LLC” doesn’t mean that the LLC is owned by a foreigner (non-US resident). It actually has nothing to do with who the owners of the LLC are. Again, it’s just to refer to an LLC that is doing business outside of its home state.
Although not an official term used by state governments, the IRS will often refer to an LLC owned by a non-US resident as a “foreign-owned LLC”.
What is a Domestic LLC?
A Domestic LLC is an LLC that was formed in its “home state” and it does business in its home state.
Unless the LLC registers to do business in another state, a Domestic LLC’s activities are confined to its home state.
For example, if you form an LLC in Florida (by filing an Articles of Organization), then you can only operate your business in Florida, since that’s the only state the LLC is qualified to do business in.
If you operate your Domestic LLC in another state without registering as a Foreign LLC this is known as illegally transacting business.
Do I have to register my LLC as a Foreign LLC in every state my customers are in?
Many readers often get confused and think they need to register their LLC in every state where they have customers, or in every state where they have sales tax nexus.
This is not the case.
Where to form your LLC is dictated by where you’re doing business. You can learn more about this here: what’s the best state to form an LLC.
Terms to help you differentiate a Foreign LLC from a Domestic LLC
The terms “register”, “qualify”, and “authority to transact business” are generally associated with the registration of a Foreign LLC.
On the other hand, the terms “form” or “create” are connected with the creation of a Domestic LLC.
Using the correct verbs can help you better understand Foreign LLCs vs Domestic LLCs. It’ll also be helpful if you’re calling your Secretary of State’s office or speaking with your accountant.
Hopefully that quick comparison helps you understand the difference between a Foreign LLC and a Domestic LLC.
The costs and requirements to register a Foreign LLC vary by state. For everyone’s convenience, we’ve created a table showing the fees and forms required by each state to qualify as a Foreign LLC. You can view the table on this page: Foreign LLC Fees by State.