By filing as a foreign entity, a business agrees to comply with local laws. This includes adhering to tax requirements, obtaining necessary licenses and permits, and fulfilling reporting obligations. Filing grants the business legal standing in the state. Without proper registration, a business may face challenges in seeking legal remedies or defending against lawsuits.
Business Relocation and Registration
To officially move company registration to another country, you must dissolve the existing company and incorporate a new one there. Your UK limited company always remains registered in the UK.
If a Delaware company has its headquarters in Illinois, it must file foreign qualification in Illinois. This informs Illinois of the company’s existence and gives the State power to regulate and tax it.
Whether an LLC owning out-of-state property needs foreign registration depends on the usage of the property. If it’s for pure investment, registration might not be required. However, if the property is used for active business operations or generates income, then registration is necessary.
After determining the need for foreign registration, check if local business licenses are also required. Contact the local licensing bureau for assistance.
Benefits of Establishing a Foreign Entity
The main benefit of a foreign entity is ensuring compliance with local laws, facilitating business operations in another market. It also helps in establishing credibility and trust with local customers and authorities. The primary advantage is avoiding potential penalties.
You must ensure your business is legally compliant in all operating states. Registering as a foreign entity involves initial state fees, regulations, and possibly ongoing fees.
Choosing an Operating Model
A Foreign Entity (also called “Out-of-State Entity”) is an entity formed outside of the state or country where your company was initially established.
There are several operating models for foreign businesses, including:
- Wholly foreign-owned enterprises (WFOEs)
- Equity joint ventures (EJVs)
- Cooperative joint ventures (CJVs)
- Foreign-invested companies limited by shares (FICLSs)
Finding Expert Assistance
To find a foreign entity setup expert, ask for recommendations, and search online for experienced service providers. Always read reviews and compare prices before making a decision.
The cost to hire a foreign entity expert varies depending on services and the country where you’re setting up your business.
Operating in Multiple States
Operating in multiple states involves conducting business activities across state lines. To legally operate in these states, a business typically needs to register as a foreign entity.
Common actions requiring foreign qualification include:
- Hiring an employee from another state
- Purchasing property or a building
- Operating physical business locations like warehouses or retail stores
- Providing services such as cleaning, construction, and employing workers in another state