Does An Online Shop Need To Register An Llc In Their Home State

A limited liability company, or LLC, that's owned and operated by a single member must be registered in the company's home state. If the LLC conducts business in multiple states, its lone member must also meet registration and reporting requirements for each one of these states. It's also important to understand what qualifies as "doing business" in another state before registering this type of business.

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Registering Your Business in Another State

Regardless of whether your business is a single-member or multiple-member LLC, you need to register in any state where you are doing business. The registration process has different names in each state, such as "foreign qualification," obtaining a "certificate of registration," and obtaining a "certificate of authority."

The exact requirements vary by state but typically involve filling out a form and paying a small fee. Fortunately, most states allow you to do this online.

Qualifying as "Doing Business"

The tricky part of foreign qualification is determining the states in which you need to register. What constitutes "doing business" in a state is not always clear. For example, does one shipment to a state in a year count? What about five shipments?

There is no black and white test for what constitutes doing business, but there are certain actions that are usually considered doing business in a state. The following are a few common business activities that signal you may be doing business and need to consider registering in another state:

You have a store or an office in another state.
A large percentage of your company's revenue comes from another state.
You are paying employees in another state.
Your business has a bank account in another state.
You conduct meetings and frequently meet clients in another state.

This is not an exclusive list and each state analyzes doing business a little differently. Sometimes, one of the above-listed activities alone does not constitute doing business but a combination of several of these activities does qualify.

Avoiding Unnecessary Registration

As a single-member LLC, you want to comply with the law, but you also want to conserve your time and financial resources. You don't want to register in states where it is not legally required because that leads to needless additional costs.

Some states provide clear guidance on what activities do not require an LLC to register in that state. For example, Section 191 of the California Corporations Code explicitly lists activities that the state does not consider as transacting intrastate business. Other states are not as clear, so in these situations, you may want to consult an attorney.

Penalties for Failing to Register

There are penalties for failing to register your business that can be very burdensome for a single member LLC. Many states impose late filing fees and will collect all taxes and fees from when the LLC started doing business in that state. Additionally, an LLC that is not registered in a state cannot file a lawsuit in that state, which can prevent it from pursuing relief if it is wronged in the state.

An online service provider can help you file the required foreign qualification paperwork in each state where you do business and are required to register. If you aren't sure if you need to register in a state, a small business attorney can help you decide and file the paperwork.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.