Do you own a limited liability company (LLC) created in a state other than Montana, but you want to expand your business to the Treasure State? If so, you’ll need to qualify your foreign LLC in order to transact business in Montana.
What is a foreign qualification and how do foreign LLCs function within the state of Montana? 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 Montana. 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 Montana 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. However, Montana state law does define exactly what is meant by “doing business” in the state.
What Qualifies as ‘Doing Business’ in Montana
According to Montana state law, “the terms ‘engaged in business’ and ‘doing business’ both mean actively engaging in any transaction for the purpose of financial or pecuniary gain or profit.” State law also provides this additional qualification: “a foreign corporation is transacting business within the meaning of subsection (1) if it enters into a contract, including a contract entered into pursuant to Title 18 (Public Contracts), with the state of Montana, an agency of the state, or a political subdivision of the state.”
What Does NOT Qualify as ‘Doing Business’ in Montana
Meanwhile, Montana has adopted the following provisions of the Revised Model Act, which outline certain activities that do not qualify as “doing business” in the state:
In addition, Montana has added the following provision:
How to Get Foreign Qualification in Montana
If you want to foreign qualify your LLC in Montana, you’ll need to file an Application for Certificate of Authority of Foreign Limited Liability Company with the Montana Secretary of State. The information required in the Certificate of Authority includes:
Filing Fee: $70 (add $20 for expedited service), with the check made payable to the “Secretary of State.”
What Is the Penalty for Not Getting Foreign Qualification in Montana?
There are two major penalties for failing to qualify a foreign LLC in Montana. First, the business would be liable for a $5 penalty fee for each day that it does business in Montana without filing the Certificate of Authority, up to a maximum of $1,000 per year. Potentially more damaging is the second penalty, which prevents your business from filing a lawsuit against a third party in a Montana court.
Should I Hire a Business Service Provider to File My Montana 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 Montana.
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 Montana is simple and inexpensive compared to some other states. However, the consequences for operating as a foreign entity in Montana without a Certificate of Authority can be steep, so this isn’t a process that any foreign business can afford to ignore.
We hope this article managed to answer your questions about obtaining a Montana foreign qualification, and we wish you a prosperous business future!