If you own a business that was created in a state other than Massachusetts, you will need to qualify or register that business in Massachusetts if you want to do business there. Here is an overview of the rules on how to qualify your foreign (non-Massachusetts) limited liability company (LLC) to do business in Massachusetts.
For Massachusetts purposes, if your LLC is formed in another state, then it is known as a foreign LLC in Massachusetts. 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 throughout the United States. For example, an LLC formed in Alabama is a foreign LLC in Mississippi.
According to Massachusetts’s LLC Act, you are required to register your foreign company with the state of Massachusetts if you are “doing business” or “transact business” Massachusetts. (Each of the latter terms is used in different places in the Act.) What does this mean? Well, like most states, Massachusetts’s LLC Act does not specifically define what “doing business” or “transact 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.
Many state LLC Acts provide a list of exempt activities (in other words, activities that do not constitute doing business in the state). These lists can be helpful: Foreign LLCs engaged only in those activities should feel reasonably confident in not registering or qualifying in the state. However, unlike other states, Massachusetts’s LLC Act does not provide a list of exempt activities.
To register your foreign business in Massachusetts, you must file an Application for Registration with theMassachusetts Secretary of State (SOS) (also known as the Secretary of the Commonwealth). You can download a copy of the application form from the SOS website.
To complete the form, you must provide more or less the same information that you need to create an LLC in your home state. More specifically, for a Massachusetts Application for Registration, you need to provide:
Along with the Application for Registration, you must include certificate of existence or certificate of good standing for your LLC, issued by the state where it is organized. You can find limited additional information on the foreign LLC webpage of the SOS website. The filing fee is $500.
If your LLC does business in Massachusetts without being registered, it cannot initiate lawsuits in the state. In addition, an unregistered LLC doing business in Massachusetts is subject to a maximum fine of $500 per year. However, not being registered does not invalidate your LLC’s contracts or leave an LLC member liable for the LLC’s obligations. Moreover, not being registered does not prevent your LLC from defending a lawsuit in Massachusetts. If your LLC is sued and does not have a resident agent in Massachusetts, or one cannot be found after a diligent search, the SOS will act the resident agent.
If your business is organized as a corporation rather than an LLC, the rules and requirements for foreign qualification in Massachusetts are similar. You will, however, have to use a different application form, Foreign Corporation Certificate of Registration. See the SOS website for forms, information, and filing instructions for registering a foreign corporation in Massachusetts.