Do you own a limited liability company (LLC) created in a state other than New York, but you want to expand your business to the Empire State? If so, you’ll need to qualify your foreign LLC in order to transact business in New York.
What is a foreign qualification and how do foreign LLCs function within the state of New York? 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 New York. 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 New York 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. New York state law does not define the term “doing business.”
What Qualifies as ‘Doing Business’ in New York
According to the New York Department of State: “Whether an organization is ‘doing business’ sufficient to require it to qualify is often the source of confusion. In part this is because we tend no longer to think about organizations, especially corporations, in the same way as do the historical cases. Another source of confusion is the fact that Business Corporation Law § 1301(b) and its analogs do not define doing business; they contain only a nonexclusive list of what does not constitute doing business. Yet more confusion stems from use of the same term, ‘doing business,’ in two other separate, but related, contexts: whether a corporation's activities in a state are sufficient to subject it to personal jurisdiction and whether a corporation's presence within a state requires it to pay taxes.” While there is no set definition of “doing business” in New York, you will generally need to form a foreign LLC if your business pursues any of the following activities:
What Does NOT Qualify as ‘Doing Business’ in New York
Meanwhile, according to New York 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 New York
If you want to foreign qualify your LLC in New York, you’ll need to file an Application for Authority with the Department of State. In addition to this form, you will need to attach a Certificate of Existence from the necessary officials in the state in which your business was formed. This certificate must be dated within one year of the filing date. The Application for Authority will require the following information:
Filing Fee: $250, with the check made payable to the “Department of State.”
What Is the Penalty for Not Getting Foreign Qualification in New York?
If you fail to qualify your foreign LLC, you will not be able to maintain a proceeding in a New York court. This means that individuals and businesses could fail to honor contracts with your business, and you wouldn’t be able to do anything about it legally.
Should I Hire a Business Service Provider to File My New York 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 New York.
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 foreign qualification in the state of New York is not overly complicated. However, you will need to acquire a Certificate of Existence from the state in which your business was formed, and the rules, fees, and wait times for this certificate can vary by state. New York’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 taken lightly, because the penalties for not qualifying a foreign LLC in New York can be severe ― especially if you are unable to sue a third party in the event of a breach of contract.
We hope this article managed to answer your questions about obtaining a New York foreign qualification, and we wish you a prosperous business future!