Do you own a limited liability company (LLC) created in a state other than Maryland, but you want to expand your business to the Old Line State? If so, you’ll need to qualify your foreign LLC in order to transact business in Maryland.
What is a foreign qualification and how do foreign LLCs function within the state of Maryland? In this guide, we’ll answer these questions and more.
Rocket 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 Maryland. 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 Maryland 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. It is important to note that Maryland state law does not define “doing business” in the state.
What Qualifies as ‘Doing Business’ in Maryland
Since there is no set definition of “doing business” in Maryland, each business is evaluated on a case-by-case basis. However, in general, you’ll need to form a foreign LLC in Maryland if your business pursues any of the following activities:
What Does NOT Qualify as ‘Doing Business’ in Maryland
Meanwhile, the Annotated Code of Maryland outlines a few exceptions: “In addition to any other activities which may not constitute doing intrastate business in this state, for the purposes of this article, the following activities of a foreign corporation do not constitute doing intrastate business in this state:
How to Get Foreign Qualification in Maryland
If you want to foreign qualify your LLC in Maryland, you’ll need to register with the Maryland Department of Assessments and Taxation (SDAT). For LLCs, this can be accomplished with the Limited Liability Company Registration form. This application with require the following information:
Filing Fee: $100, with checks made payable to the “Department of Assessments and Taxation.” If your company has already been doing business in Maryland prior to filing for foreign qualification, you will need to include a $200 penalty fee with this application.
What Is the Penalty for Not Getting Foreign Qualification in Maryland?
In addition to the $200 fee that must be paid, there are two major penalties for failing to qualify a foreign LLC in Maryland. First, your business will not be able to bring a lawsuit in a Maryland court. And second, each LLC member and agent is guilty of a misdemeanor and can be fined up to $1,000.
Should I Hire a Business Service Provider to File My Maryland 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 Maryland.
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 Maryland isn’t particularly complicated compared to some other states. In addition, many entities can be exempt from needing foreign qualification, depending on the nature of their business. Still, this isn’t a process that you can afford to ignore, because the penalties for not qualifying a foreign LLC in Maryland can be severe ― especially if all the members of your LLC are fined and charged with a misdemeanor offense.
We hope this article managed to answer your questions about obtaining a Maryland foreign qualification, and we wish you a prosperous business future!