If you own a business that was created in a state other than Connecticut, you will need to qualify or register that business in Connecticut if you want to do business there. Here is an overview of the rules on how to qualify your foreign (non-Connecticut) limited liability company (LLC) to do business in Connecticut.
For Connecticut purposes, if your LLC is formed in another state, then it is known as a foreign LLC in Connecticut. 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 Arizona is a foreign LLC in Colorado.
According to Connecticut’s LLC Act, you are required to register your foreign company with the state of Connecticut if you are “transacting business” in Connecticut. What does this mean? Well, like most states, Connecticut’s LLC Act does not specifically define the phrase “transacting business” 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 can 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, Connecticut’s LLC Act specifies certain activities that do not constitute transacting business in the state. The items listed include:
In addition, the LLC Act indicates that the latter list is not exhaustive; other activities also may be exempt. Moreover, in some circumstances, if your LLC purchases, holds, mortgages, leases, sells, or conveys real or personal property, that, too, is not considered transacting business under the LLC Act. Still further, under the LLC Act, a foreign LLC that has an ownership interest in another business that transacts business in Connecticut, without more, is not considered to be transacting business in the state. For the full, legal description of all of these exempt activities, check Section 34-235 of the Connecticut General Statutes.
If your LLC’s only activity in Connecticut is one or more of these activities, you should not need to register with the state.
To register your business in Connecticut, you must file an Application for Registration Limited Liability Company—Foreign with the Connecticut Secretary of State (SOS). You can download a copy of the application form from the SOS website.
To complete the application, you must provide more or less the same information that you need to create an LLC in your home state. More specifically, for a Connecticut application for registration, you need to provide:
You may submit the application by mail or in person. The filing fee is $120.
You may also find helpful the SOS’s online registration checklist for out-of-state registrations.
If your LLC transacts business in Connecticut without being registered, it cannot bring a lawsuit in any of the state’s courts. In addition, your LLC will be liable for all fees and taxes it should have paid if properly registered, as well as all interest and penalties imposed for the failure to pay. Furthermore, an LLC is liable for an additional penalty $300 per month for each month it should have been registered but was not, and may be blocked by the state from transacting further business in Connecticut until all penalties and fines have been paid.
However, not being registered does not invalidate your LLC’s contracts or prevent it from defending a lawsuit in Connecticut. Also, a member of the LLC is not liable for the LLC’s debts and obligations solely because the company transacted business in Connecticut without a certificate of registration.
If your business is organized as a corporation rather than an LLC, the rules and requirements for foreign qualification in Connecticut are similar. You will, however, have to use a different application form (Form CFAS-1-1.0). See the Connecticut Secretary of State website for forms, information, and filing instructions for registering a foreign corporation in Connecticut.