Do you own a limited liability company (LLC) created in a state other than Vermont, but you want to expand your business to the Green Mountain State? If so, you’ll need to qualify your foreign LLC in order to transact business in Vermont.
What is a foreign qualification and how do foreign LLCs function within the state of Vermont? 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 Vermont. 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 Vermont 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. However, Vermont state law does provide a definition of “doing business” as it relates to foreign corporations operating in the state.
What Qualifies as ‘Doing Business’ in Vermont
According to the Vermont Secretary of State:
(a) A foreign corporation may not transact business in this State until it obtains a certificate of authority from the Secretary of State. (b) Except as otherwise provided, "doing business" or "transacting business" shall mean and include each act, power, or privilege exercised or enjoyed in this State by a foreign corporation.” While this definition is vague, it is generally referring to the following activities:
What Does NOT Qualify as ‘Doing Business’ in Vermont
Meanwhile, the state of Vermont provides the following exceptions to the above definition: “Under 11A V.S.A. § 15.01(c), if the extent of a business's activities in Vermont is limited to the following, that business is not required to register with the Secretary of State in order to operate in Vermont: Please Note: If a business's activities merely include, but are not limited to, the following, the business is NOT exempt from registration.
How to Get Foreign Qualification in Vermont
If you want to foreign qualify your LLC in Vermont, you will need to file an Application for Certificate of Authority with the Secretary of State. You may do so online, or request the forms by mail. In either case, you will need to provide some general information about your business:
You can learn more about obtaining a Certificate of Authority in Vermont here.
Filing Fee: $125.
What Is the Penalty for Not Getting Foreign Qualification in Vermont?
If your business operates in the state of Vermont without first obtaining a Certificate of Authority, your business will not be allowed to maintain a proceeding in the Vermont court system. 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 Vermont 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 Vermont.
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 Vermont isn’t particularly complicated compared to some other states. You can file online or by mail, though for the latter, you will need to request the necessary forms from the Secretary of State’s office. In addition, Vermont’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 overlooked or taken lightly, because the penalties for not qualifying a foreign LLC in Vermont 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 Vermont foreign qualification, and we wish you a prosperous business future!