If you own a business that was created in a state other than Maryland, you will need to qualify or register that business in Maryland if you want to do business there. Here is an overview of the rules on how to qualify your foreign (non-Maryland) limited liability company (LLC) to do business in Maryland.
For Maryland purposes, if your LLC is formed in another state, then it is known as a foreign LLC in Maryland. In other words, foreign doesn’t mean from another country. Instead, it means your business was organized under the laws of another state. A domestic LLC, on the other hand, is one that is formed in the state where it is doing business. This is common usage through the United States. For example, an LLC formed in North Dakota is a foreign LLC in South Dakota.
According to Maryland’s LLC Act, you are required to register your foreign company with the state of Maryland if you are “doing business” in Maryland. What does this mean? Well, like most states, Maryland’s LLC Act does not specifically define what the phrase “doing business” means in relation to foreign registrations.
However, state laws governing when foreign companies must collect state sales tax in their state provide some guidance on the issue. Under these laws, a business must have a physical presence in—or nexus with—the state in order to be required to collect state sales tax on sales to that state’s residents. Generally speaking, physical presence and nexus are synonymous, and mean having:
Certain exceptions may apply and the rules get more complicated with things like Internet sales. Nevertheless, in general, if you have an office, a store, a warehouse, or employees in another state, you will need to qualify your LLC as a foreign company in that state. For more details, including some possible distinctions between physical presence and nexus, check Nolo’s articles on Internet Sales Tax: A 50-State Guide to State Laws.
Like most states, Maryland’s LLC Act specifies certain activities that do not constitute transacting business in the state. The items listed include:
While the last listed items indicate that owning property in Maryland acquired through foreclosure is not doing business in the state, the LLC Act also states, conversely, that owning income-producing real estate or tangible personal property in Maryland does constitute doing business in the state. For the actual legal description of each of the foregoing listed items, check Section 4A-1009 of the LLC Act. The Act itself is a subsection of the Corporations and Associations section of the Maryland Code. You can access the Code online through a private websitemaintained by LexisNexis.
If your LLC’s only activity in Maryland is one or more of the listed items, you should not need to register with the state.
To register your foreign business in Maryland, you must file a LIMITED LIABILITY COMPANY REGISTRATION with the Maryland Department of Assessments & Taxation (SDAT). You can download a copy of the form from the SDAT website or file online using Maryland Business Express.
To complete the registration, you must provide more or less the same information that you need to create an LLC in your home state. However, since every state is a little different, there may be items that Maryland asks for that you did not need to provide when you first organized your LLC. More specifically, for a Maryland registration, you need to provide:
As noted in the listed items, your LLC’s name must be distinguishable from other business entities already registered in Maryland. Also, if you previously were doing business in the state without having registered, you must include a $200 penalty with your registration in order for it to be processed. And, you must include a Certificate of Good Standing or equivalent document from the state where your LLC is formed. The filing fee is $100.
If your LLC transacts business in Maryland without having registered, it cannot bring a lawsuit in the state. In addition, each member and agent of a foreign LLC that does business in Maryland without registering is guilty of a misdemeanor and subject to a fine of up to $1,000. However, not being registered does not invalidate any of your LLC’s contracts or stop your LLC from defending a lawsuit in the state.
If your business is organized as a corporation rather than an LLC, the rules and requirements for foreign qualification in Maryland are similar. You will, however, have to use a different application form, Foreign Corporation Qualification. See the SDAT website for forms, information, and filing instructions for registering a foreign corporation in Tennessee.