Do you own a limited liability company (LLC) created in a state other than Tennessee, but you want to expand your business to the Volunteer State? If so, you’ll need to qualify your foreign LLC in order to transact business in Tennessee.
What is a foreign qualification and how do foreign LLCs function within the state of Tennessee? 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 Tennessee. 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 Tennessee 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. Tennessee state law does not define exactly what is meant by “doing business” in the state.
What Qualifies as ‘Doing Business’ in Tennessee
Since there is no set definition of “doing business” in Tennessee, each foreign entity is evaluated on a case-by-case basis. However, in general, you will need to form a foreign LLC in Tennessee if your business pursues any of the following activities:
What Does NOT Qualify as ‘Doing Business’ in Tennessee
Meanwhile, Tennessee state law outlines the following activities that are not considered to be “doing business” and therefore do not require foreign qualification in the state:
How to Get Foreign Qualification in Tennessee
The application to obtain foreign qualification in Tennessee is easier than in most states, as Secretary of State allows foreign entities to apply for a Certificate of Authority online. Whether you choose to file by mail or online, you will need to provide the following information:
Filing Fee: $50 per LLC member, with a minimum fee of $300 and a maximum fee of $5,000. All checks should be made payable to the “Tennessee Secretary of State.”
What Is the Penalty for Not Getting Foreign Qualification in Tennessee?
There are two major penalties for failing to qualify a foreign LLC in Tennessee. First, your business will be unable to file a lawsuit against a third party in a Tennessee court. And second, your business will be liable for all fines and fees. A Certificate of Authority will not be issued until these fines and fees are paid in full.
Should I Hire a Business Service Provider to File My Tennessee 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 Tennessee.
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 Tennessee isn’t particularly complicated compared to some other states. You can do everything online and it shouldn’t take more than 2-3 weeks for everything to process. However, if you have numerous LLC members, the application could cost your business as much as $5,000 in processing fees. Still, this isn’t a process that should be overlooked or taken lightly, because the penalties for not qualifying a foreign LLC in Tennessee can be severe.
We hope this article managed to answer your questions about obtaining a Tennessee foreign qualification, and we wish you a prosperous business future!