Do you own a limited liability company (LLC) created in a state other than Washington DC, but you want to expand your business to the Nation’s Capital? If so, you’ll need to qualify your foreign LLC in order to transact business in Washington DC.
What is a foreign qualification and how do foreign LLCs function within the state of Washington DC? 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 Washington DC. 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 Washington DC 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, the District of Columbia does define exactly what is meant by “doing business.”
What Qualifies as ‘Doing Business’ in Washington DC
According to the Department of Consumer & Regulatory Affairs, a business entity is defined as “any trade, profession, or activity which provides, or holds itself out to provide, goods or services to the general public or to any portion of the general public, for hire or compensation in the District of Columbia.”
What Does NOT Qualify as ‘Doing Business’ in Washington DC
Meanwhile, the following activities are not considered to be “doing business” in Washington D.C., and you do not need to qualify a foreign LLC to pursue them:
How to Get Foreign Qualification in Washington DC
In order to register a foreign LLC in the District of Columbia, you will need to file a Foreign Registration Statement with the Corporations Division. This is a simple form that requires the following information:
Filing Fee: $220, with the check made payable to the “Corporations Division.”
What Is the Penalty for Not Getting Foreign Qualification in Washington DC?
There are two major penalties for failing to qualify a foreign LLC in Washington D.C. First, your business will not be able to file a lawsuit in a D.C. court. And second, your business will be liable for all unpaid fees, as well as additional penalties. The business will not be able to apply for foreign qualification until all of these fees and penalties have been paid.
Should I Hire a Business Service Provider to File My Washington DC 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 Washington DC.
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 Washington D.C. isn’t particularly complicated. It requires one simple form and payment of a processing fee. However, you will need to provide a Certificate of Good Standing, which can take additional time to acquire. In addition, Washington D.C.’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, because the penalties for not qualifying a foreign LLC in Washington D.C. 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 Washington DC foreign qualification, and we wish you a prosperous business future!