Do you own a limited liability company (LLC) created in a state other than Pennsylvania, but you want to expand your business to the Quaker State? If so, you’ll need to qualify your foreign LLC in order to transact business in Pennsylvania.
What is a foreign qualification and how do foreign LLCs function within the state of Pennsylvania? 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 Pennsylvania. 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 Pennsylvania 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. While Pennsylvania state law does not provide a precise definition of ‘doing business,” it does give a general outline of activities that qualify, as well as activities that are exempt from needing foreign qualification.
What Qualifies as ‘Doing Business’ in Pennsylvania
According to the Pennsylvania Department of State:
In general terms, any conduct more regular, systematic, or extensive than that described above constitutes doing business and requires the foreign association to register to do business. Typical conduct requiring registration includes maintaining an office to conduct local intrastate business, selling personal property not in interstate commerce, entering into contracts relating to the local business or sales, and owning or using real estate for general purposes.”
What Does NOT Qualify as ‘Doing Business’ in Pennsylvania
Meanwhile, the Department of State provides the following list of activities that are exempt from needing foreign qualification:
How to Get Foreign Qualification in Pennsylvania
If you want to foreign qualify your LLC in Pennsylvania, you’ll need to file a Foreign Registration Statement with the Pennsylvania Department of State. This form requires 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 Pennsylvania?
If you fail to register your foreign business with the state, you will be unable to file a lawsuit against a third party in a Pennsylvania court. However, you will still be able to defend against lawsuits. This means that individuals or businesses could break contracts with your business, and you would not be able to seek justice in a court of law.
Should I Hire a Business Service Provider to File My Pennsylvania 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 Pennsylvania.
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 Pennsylvania isn’t particularly complicated compared to some other states. Still, this isn’t a process that should be overlooked, because the penalties for not qualifying a foreign LLC in Pennsylvania can be severe ― especially if someone you do business with doesn’t live up to their end of a contract and you’re unable to sue them.
We hope this article managed to answer your questions about obtaining a Pennsylvania foreign qualification, and we wish you a prosperous business future!