If you own a business that was created in a state other than Michigan, you will need to qualify or register that business in Michigan if you want to do business there. Here is an overview of the rules on how to qualify your foreign (non-Michigan) limited liability company (LLC) to do business in Michigan.

What is a Foreign LLC?

For Michigan purposes, if your LLC is formed in another state, then it is known as a foreign LLC in Michigan. 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 North Dakota is a foreign LLC in South Dakota.

Transacting Business in Michigan

According to Michigan's LLC Act, you are required to register your foreign company with the state of Michigan if you are "transacting business" Michigan. What does this mean? Well, like most states, Michigan's LLC Act does not specifically define what the phrase "transacting 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 many states, Michigan's LLC Act specifies certain activities that do not constitute transacting business in the state. The items listed include:

• defending or settling a lawsuit
• dealing with internal business affairs such as holding member or manager meetings
• having a bank account in the state
• having an office, agency, or persons in the state for handling your company's own securities
• selling through independent contractors
• soliciting or obtaining orders where the orders require acceptance outside the state before they become contracts
• creating or acquiring indebtedness, mortgages, or security interests in real estate or personal property
• securing or collecting debts
• owning, without more, real estate or personal property
• conducting an isolated transaction that is completed within thirty days and is not in the course of similar, repeated transactions; and
• transacting business in interstate commerce.

For the actual legal description of each of these items, check Section 450.5008 of the Michigan Consolidated Laws. If your LLC's only activity in Michigan is one or more of the listed items, you should not need to register with the state.

Certificate of Authority

To register your foreign business in Michigan, you must file an Application for Certificate of Authority to Transact Business in Michigan with the Michigan Department of Licensing and Regulatory Affairs (LARA). You can download a copy of the blank application (Form CSCL/CD-760) from the LARA 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. However, since every state is a little different, there may be items that Michigan asks for that you did not need to provide when you first organized your LLC. More specifically, for a Michigan Certificate of Authority, you need to provide:

• the name of your LLC
• if your LLC's name is not available in Michigan (because another Michigan business has already registered the name), the assumed name your LLC will use in Michigan
• the name of the state where your LLC is organized
• the date on which you organized your LLC
• the duration of your LLC (if other than perpetual)
• the street address of your LLC's principal office in the state where it was organized
• the street address and, if different, mailing address of your LLC's registered office in Michigan
• the name of your LLC's Michigan registered agent
• the name and address of a member or manager of your LLC (in case you have no registered agent in Michigan or one cannot be found) where the state can send legal documents
• the specific business your LLC will transact in Michigan including a statement that the LLC is authorized to transact such business, and
• an authorized signature.

You must attach a certificate of good standing for your LLC, issued by the state where your LLC is organized, to your application. The certificate cannot be day more than thirty days prior to the date LARA receives your application. The filing fee is $50.

What If You Don't Register?

If your LLC transacts business in Michigan without a Certificate of Authority, it cannot bring a lawsuit in the state. Moreover, if your LLC transacts or conducts business in Michigan without authority, both the LLC itself, and each LLC member and manager who participates in transacting business in the state, is liable for penalties that can range up to $10,000. However, not having a valid Certificate of Authority does not prohibit your LLC from defending lawsuits in Michigan or invalidate any of your LLC's contracts. Also, members of your LLC are not liable for the LLC's debts and obligations solely because the LLC transacted business in Michigan without a valid certificate of authority.

Registering a Foreign Corporation in Michigan

If your business is organized as a corporation rather than an LLC, the rules and requirements for foreign registration in Michigan are similar to those for an LLC. You will, however, have to use a different application form,Application For Certificate Of Authority To Transact Business Or Conduct Affairs In Michigan. See the LARA website for forms, information, and filing instructions for registering a foreign corporation in Michigan.