If you own a business that was created in a state other than Delaware, you will need to qualify or register that business in Delaware if you want to do business there. Here is an overview of the rules on how to qualify your foreign (non-Delaware) limited liability company (LLC) to do business in Delaware.
For Delaware purposes, if your LLC is formed in another state, then it is known as a foreign LLC in Delaware. 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 Delaware's LLC Act, you are required to register your foreign company with the state of Delaware if you are "doing business" in Delaware. What does this mean? There is not much guidance in in Delaware's LLC Act other than a statement that the words "doing business," the "doing of business" or "business done in this State'" when applied to a foreign LLC mean "the course or practice of carrying on any business activities in the State of Delaware, including, without limiting the generality of the foregoing, the solicitation of business or orders in the State of Delaware."
State laws governing when foreign companies must collect state sales tax in their state also help provide guidance on the issue of what doing business means. 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, Delaware's LLC Act specifies certain activities that do not constitute doing business in the state. The items listed include:
For the full, legal description of each of the listed items, check Title 6, Section 18-912 of the Delaware Code. The Act also states that the exempt activities do not apply when determining whether an LLC is liable for taxes, service of process (receiving papers related to lawsuits), or regulations under other areas of Delaware law.
If your LLC's only activity in Delaware is one or more of the listed items, you should not need to register with the state.
To register your business in Delaware, you must file a Certificate of Registration of a Foreign Limited Liability Company with the Delaware Division of Corporations (DOC). 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 Delaware certificate of registration, you need to provide:
You also must include a certificate of existence with your application. The certificate should be issued by the Secretary of State (or equivalent office) in the state where your LLC was formed. The certificate must be dated within six months of the date you file your application. The basic filing fee is $200.
If your LLC transacts business in Delaware without authority, it cannot bring a lawsuit in the state. Your LLC will only be able to bring a lawsuit after it has paid all fees and penalties due for all years and parts of years when it should have been registered. In addition, an LLC doing business in Delaware will be fined $200 for each year or part of a year during which it failed to register. However, not being registered does not invalidate your LLC's contracts or prevent it from defending a lawsuit in Delaware. Also, a member of the LLC is not liable for the LLC's obligations solely because the company transacted business in Delaware without registration.
If your business is organized as a corporation rather than an LLC, the rules and requirements for foreign qualification in Delaware are similar. You will, however, have to use a different application form (Qualification Certificate of a Foreign Corporation). See the Delaware Secretary of State website for forms, information, and filing instructions for registering a foreign corporation in Delaware.