How to Qualify as a Foreign Business in Maryland

Learn the rules for qualifying your LLC to do business in Maryland.

By , Contributing Author

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.

What is a Foreign LLC?

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.

Doing Business in Maryland

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:

  • a warehouse in the state
  • a store in the state
  • an office in the state, or
  • a sales representative in the state.

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.

Certain Activities Are Exempt

Like most states, Maryland's LLC Act specifies certain activities that do not constitute transacting business in the state. The items listed include:

  • dealing with a lawsuit
  • dealing with internal business affairs such as holding member or manager meetings
  • having a bank account in the state
  • conducting an isolated transaction not in the course of a number of similar transactions
  • foreclosing mortgages and deeds of trust on property in Maryland
  • as a result of default under a mortgage or deed of trust, acquiring title to property in Maryland by foreclosure
  • holding, protecting, renting, maintaining, and operating property in Maryland acquired by foreclosure; or
  • selling or transferring title to property in Maryland acquired by foreclosure to any person, including the Federal Housing Administration or the Veterans Administration.

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.

LLC Registration

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:

  • the full legal name of your LLC in the state where it was organized
  • if different, the name of your LLC in Maryland (you may need to use a different name if the legal name under which your LLC originally was created is already in use in Maryland; also, the name in Maryland must include the phrase "Limited Liability Company" or "LLC")
  • the name of the state where your LLC was formed
  • the date on which you formed your LLC
  • your LLC's principal office address, which must be a street address
  • a statement of the nature of your LLC's business in Maryland
  • the name and street address in Maryland of your LLC's Maryland registered agent (if none is named, SDAT will act as your LLC's registered agent in Maryland)
  • a statement as to whether the LLC has done business in Maryland prior to filing the registration (if so, a $200 penalty must accompany the registration)
  • a signed statement of consent from your Maryland registered agent, and
  • an authorized signature.

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.

What If You Don't Register?

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.

Registering a Foreign Corporation in Maryland

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.

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