Can my LLC operate in another state?

The straightforward answer to the question “Can my LLC operate in another state?” is yes! A Limited Liability Company must only be registered in one state to operate in the US. Business owners usually choose to register their company in the state where they will have physical connections, such as warehouses, offices, or employees. However, in some cases, taxes, fees, and legislation make it more beneficial for entrepreneurs to register their LLCs in one state while operating in another one.

One example of this is California. The state offers great business opportunities, especially in the tech industry, however, its legislation is not as favorable as in places like Delaware and Wyoming. Companies like Meta and Google, for example, have chosen to be registered elsewhere, even when physically operating in Silicon Valley.

Keep reading to learn more about how your business can be registered in one state and operate in another.

Can my LLC operate in another state?

The LLC registration process happens mainly at the state level. Usually, for US residents looking to start a small business, it is advised that their company should be open in the same state they reside or operate. Still, this is not a rule since US states don’t require residency to open a business. That’s why an LLC can be formed in any state and operate in multiple places. 

A business can be registered in a different state than its operations, depending on its business model. For example, e-commerce sales, or digital services can be conducted in any state. However, if the business has a physical presence, assets, employees, merchandising, or even conducting most of its business in a different state it will need to go through a registration process.

Having the proper structure in place when doing business in different states is mandatory to stay compliant in the US. When entrepreneurs are looking to have a company working in different states, there are a few options. The foreign qualification process will allow your LLC to operate in another state as the same company, while a holding company will be an independent structure. 

Keep reading and find out how your LLC can operate in another state.

What is the Foreign Qualification process? 

To decide where is the best place to form your LLC, you should consider where you’ll be engaged in business. States have different requirements to consider a company as “Doing Business” in their jurisdiction. Frequently, it comes down to having a physical presence, assets, employees, or merchandising in a different state. 

When a business meets the criteria, it must go through a Foreign LLC qualification process. This refers to American companies operating in a different state than where they were formed. If a company doesn’t go through the registration process, it may face penalties and won’t be able to bring legal action in the state. 

To operate as a Foreign LLC, entrepreneurs have to register the business and appoint a Registered Agent in each state where they plan to work. This is usually done through an online filing system, and it may require fees depending on the state. Some places will also ask for a certificate of good standing from the state where your LLC initially was formed. 

The process of qualifying your LLC to work in another state starts by opening your company in the US. For entrepreneurs, this can already be a daunting task. One way to make it easier is by relying on the right partners. Globalfy provides everything you need to start a company in the US without the hassle. If you already have a US company and are looking to expand, the company also has Registered Agents and Foreign Qualification services to make the process of operating in multiple states stress-free! 

Can a Holding LLC own a company from another state? 

Another option for a business looking to operate in a different state is through a holding company. All you need to be a holding company is to open your business in the US and create another company or acquire shares or equity in a company.

This corporate structure also allows businesses to work in different states while reducing the overall tax load. If the operating companies under the holding are also LLCs, the profit and losses from all subsidiaries will be taxed under the ultimate owner Tax Return. This means that if some activities have a loss, it can be offset by the profits from others. 

One of the advantages of the holding company structure is how easily it can be started. The process is the same as opening a new LLC. With Globalfy, foreign business owners can create their holding LLCs from anywhere through a simple 5-min form. 

Should I register and operate my LLC in different states?

Now that you know that LLCs can operate in other states, it’s time to see whether it’s a good idea. This may be a complex process for small business owners residing in the US. However, a growing business looking for investments can take advantage of this situation. 

Although, international business owners also want to know if their LLC can operate in another state. So in these cases, it usually comes down to their industry. Tech companies and freelancers operating overseas can, most of the time, work with clients in different states without needing to register as Foreign businesses. However, e-commerce operations may need to be registered in the state they have a fulfillment center or warehouse.

Even if your business doesn’t qualify as a Foreign Entity in another state, it may still need to pay some kind of taxes elsewhere. For example, a business may need to pay Sales Taxes if they conduct a certain volume of transactions in a state in 12 months. 

Benefits of operating in another state

• Fewer fees and taxes: As a holding company, your LLC will only need to pay its taxes in one state. When choosing where to register, business owners can favor states with lower taxes and fees. 
• More privacy: Registering your LLC in states such as Delaware and Wyoming is a way to benefit from privacy laws.
• Pro-business legislations: States such as Delaware, Wyoming, and Texas have a business-friendly environment and offer favorable conditions for business owners. 

Disadvantages of operating in another state 

• Double taxation: As a foreign company, businesses may need to pay taxes in both states where they are registered. 
• Compliance in both states: Even if they don’t need to pay income taxes, businesses are responsible for acquiring business licenses and paying sales taxes. 
• Expenses: The foreign qualification process and the holding company will bring new expenses to your business. 

Best states to form your LLC

Even when working in more than one state, it is important to consider the places that offer the most beneficial conditions for companies. Check out some of the states that offer the most advantages to expand or even start a business in the US. 

Delaware

Delaware is one of the best states for business formation in the US. The state offers a solid legal framework for businesses and tax advantages, such as no sales tax and no income taxes for out-of-state residents. It also has total privacy for LLCs.  

Wyoming

Opening a business in Wyoming can also be favorable to entrepreneurs looking to start a business or expand. The state doesn’t have individual income taxes or public LLC information records. It also offers low registration and annual renewal costs.

New Mexico

Even though LLC owners in New Mexico need to pay state income taxes, the state provides privacy for business owners, a low LLC formation fee, and no Annual Report or Franchise Tax. 

How to form your LLC right now?

The first step to operating a business in multiple states is establishing an LLC in the US. This process can be made easier with specialized help. You can find the best structure to start your company and do business in the US through specialists’ guidance.  

Globalfy offers an all-in-one business formation plan with all the support you need to make the best decisions for your business’s needs. It also includes perks such as one year of Virtual Address and Registered Agent, a US business bank account (restrictions apply), and over $200,000 in discounts and benefits to make your business thrive in the US!