Do you own a limited liability company (LLC) created in a state other than Minnesota, but you want to expand your business to the North State State? If so, you’ll need to qualify your foreign LLC in order to transact business in Minnesota.
What is a foreign qualification and how do foreign LLCs function within the state of Minnesota? In this guide, we’ll answer these questions and more.
Guru Tip: If you’d rather hire an online service to handle this process for you, many of the best LLC services can handle it for you.
What Is a Foreign Qualification?
A foreign qualification enables your limited liability company to do business in the state of Minnesota. It doesn’t matter which state you originally formed your business in ― or in other words, the state your domestic LLC is located in ― as the qualification process to register a foreign LLC in Minnesota is the same regardless of where your domestic LLC is based.
The confusion surrounding foreign qualification usually centers on what it means to “do business” in a state outside of your primary state. This gets especially problematic considering some states don’t strictly define what it means to transact business in that state. Minnesota state law does not provide an exact definition for “doing business in the state.”
What Qualifies as ‘Doing Business’ in Minnesota
Despite the lack of a clear definition, there are some activities that usually require foreign entities to obtain a Certificate of Authority. In general, you’ll need to form a foreign LLC in Minnesota if your business pursues any of the following activities in this state:
What Does NOT Qualify as ‘Doing Business’ in Minnesota
According to Minnesota state law, the following activities are not considered to be “doing business” in the state, and you do not need to qualify a foreign LLC to pursue them:
How to Get Foreign Qualification in Minnesota
If you want to foreign qualify your LLC in Minnesota, you’ll need to file a Certificate of Authority to Transact Business in Minnesota. This form can be submitted online via the Secretary of State’s website or mailed to the Office of the Secretary of State. The information required in the Certificate of Authority includes:
Filing Fee: $220 (online) or $200 (by mail), with the check written to the “MN Secretary of State.”
What Is the Penalty for Not Getting Foreign Qualification in Minnesota?
There are three major penalties for failing to qualify a foreign LLC in Minnesota. First, your business will not be able to bring forward a lawsuit in a Minnesota court. Second, your business will be liable for any fees that would have otherwise been paid to obtain a Certificate of Authority. And third, your business and any individual members who transacted business in Minnesota will be liable for penalties.
Should I Hire a Business Service Provider to File My Minnesota Foreign Qualification?
If you don’t want to handle your foreign qualification on your own, you have options. Some entrepreneurs choose to hire a lawyer to prepare and file their Certificate of Authority, which can be a good option if you’re concerned about getting the job done right. However, attorney’s fees can be quite expensive.
The other option is to hire a business service provider like Incfile or ZenBusiness to register your foreign LLC with the state of Minnesota.
These companies can typically get your foreign qualification done for a fraction of the price of an attorney. This is our preferred route if you don’t want to go with the DIY option.
The process for getting a foreign qualification in the state of Minnesota isn’t particularly complicated compared to some other states. In addition, Minnesota’s rules and regulations regarding which LLCs need to foreign qualify are considerably looser than many states. Still, this isn’t a process that should be overlooked or taken lightly, because the penalties for not qualifying a foreign LLC in Minnesota can be severe in some cases ― especially if someone you do business with doesn’t live up to their end of a contract and you’re unable to sue them. The penalties can also be expensive if you have multiple LLC members transacting business in the state without a Certificate of Authority.
We hope this article managed to answer your questions about obtaining a Minnesota foreign qualification, and we wish you a prosperous business future!