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Resource Center / Starting a Business

How to Open a Business in the US: Domestic LLCs, Foreign Entity Registration, and More

Whether you're a home-grown US entrepreneur or a foreign company looking to expand, you'll need to understand domestic LLCs, foreign entity registration, and the administrative work required to legally start a business in the US.

Kade Dalton
Nov 19, 20215 minutes

Anyone can start a business in the US; you don’t need to be a US citizen to form an LLC in the states. It’s not uncommon for foregin businesses to “open a business” in order to expand their existing company’s operations to the United States.

Before you open a business, you’ll need to understand a few key concepts. Where do I form my LLC? What is foreign entity registration? What are registered agents and why might my business need one?

We’ll answer these common questions as well as cover the US federal laws that apply to your foreign entity.

Choose Where to Form Your LLC

Let’s start by distinguishing an LLC from other types of business structures. Foreign companies commonly use LLCs, or limited liability companies, as the type of business structure. There are several different types of business structures, but LLCs are commonly selected as business structures because they, by default, have something called pass-through tax treatment, meaning that the taxes of your business “pass through” to the owners of the business, unlike a corporation where both the business and the owner must pay federal income taxes.

Where you form your LLC can have many huge implications. Your LLC will be considered a “domestic LLC” in whichever state it's formed, and you may need to register the LLC as a foreign entity in other states where you plan to conduct business — we’ll define what “doing business” means in the legal sense in just a moment. If you legally conduct business in multiple states, you may need to register as a foreign entity in each of those states.

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Laws that govern who must register as a foreign LLC, and how they do so, vary from state to state.

What is doing business? And what if you expand your business’s presence, offices, or business transactions outside the state where you first registered your LLC? This gets into something known as foreign qualification.

Register your foreign entity

As we mentioned earlier, after a business first establishes itself as a domestic LLC in a home state, the business is then responsible for registering as a foreign entity in any other US states where it does business.

This is where foreign entity registration comes into play. It’s important to understand that whether you’re a US business or a non-US business, foreign entity registration can still apply to your business. Foreign qualification applies to any company who plans to conduct business outside the state where it was formed.

Foreign entity registration varies from state to state, but the application generally includes basic information about the company. This document that a business files as part of its foreign entity registration for a state is sometimes referred to as an application for authority.

The process of foreign entity registration varies in cost and processing times on a state-by-state basis; what their registration fees are, whether they require you to maintain a “registered agent”, and if they require you to file an annual report, all depend on the state. (We’ll talk more about registered agents in just a moment.)

When do you need to register as a foreign entity?

When it comes to foreign companies transacting business in a state, it’s not always clear what business activities count as “doing business”. Not every type of business activity in a state requires foreign registration.

To see if your company is considered as doing business in a particular state, review the following questions. If any of these are true, you might need to register as a foreign entity in that state.

  • Do you have one or more employees in that state?

  • Does your business have a physical presence (such as a warehouse, factor, or storefront) in that state?

  • Do you accept business orders in that state, or have liability to collect sales tax?

  • Does your company have a bank account in that state, or plan to open one?

  • Does your business earn revenue in that state?

Speak with your tax advisor or legal counsel to determine whether foreign qualification is required for your business.

Hire a registered agent

A registered agent is an individual or entity designated to receive that business’s official mail, service of process notices, and compliance-related documents. In other words, a registered agent receives and forwards important correspondences on behalf of the LLC.

Should you hire a registered agent or be your own?

Imagine taking the work and due diligence of foreign entity registration and multiplying it for every state where you plan to conduct business.

If you consider the immense complexities of registering as a foreign entity in every US state where you conduct your business, besides your “home state”, it makes sense to designate an individual or entity to cover this for you.

A registered agent must be a legal resident of the state where you registered your business, again, known as your home state.

Comply with Applicable US Federal, State, and Local Laws

Now that you’ve set up your business in the US, you’re legally required to comply with applicable federal, state, and local employment laws; business-related taxes; and more.

Once registered, you might also be subject to annual fees and annual reporting requirements. For example, in New York, certain partnerships, limited liability companies (LLCs), and limited liability partnerships (LLPs) must pay an annual filing fee. Again, consult with your tax advisor or legal counsel to determine what annual fees or requirements to which your business is subject.

And as with many of the processes you face when registering your foreign entity, it helps to have third-party support to keep your business on track with common compliance hurdles, such as filing FICA taxes and state and federal payroll taxes.

Justworks, a Professional Employer Organization (PEO) that operates in all 50 states, can support your employment-related compliance needs once you officially start your business. Learn more about the Justworks services and features here.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.