Dear Rich: My business partner and I recently created a non-transacting LLC in Texas, where I live. He, however, lives in Colorado. Is there anything he must file with his state? I have searched all over and cannot find anything. We spent a little time trying to figure out what this question has to do with intellectual property and finally gave up. We're also not sure what a "non-transacting LLC" is. Google doesn't seem to know, and neither does the State of Texas. Do you mean that you're not transacting business in Texas? Knowing where you transact business is key to answering your questions ... In any case, here are some things to consider.
What's typical? Most LLCs (and corporations) are organized in one state and may or may not have to register ("qualify to do business") in other states. The state in which the LLC is organized is usually the state in which it has its principal place of business or where some or all of the owners live. If the LLC plans to do business in other states, the LLC must qualify in those states. Keep in mind, your LLC must only qualify in other states if it is engaged in intrastate commerce, not if it's engaged in interstate commerce. (This article explains the distinction.) If the only connection that your LLC has with Colorado is that an owner lives there, that would not be a basis for qualifying to do business in Colorado. If, on the other hand, you operated stores in Colorado, you would likely have to qualify.
What does it mean to qualify to do business? "Qualification" refers to a registration process that
involves filing paperwork and paying fees—similar to the procedures and fees required for incorporating or forming an LLC. You must also designate a registered agent—a resident person or company in the state who agrees to accept legal papers on your behalf in the state. The qualification fees range from $100 to $300 or more (depending on the state). Your Secretary of State can fill you in on the requirements.
Other filings ... Because we're not clear where and how you operate your business, we're not sure what other filings you will need to make. LLCs, unlike corporations, do not pay income taxes. The owners must declare the LLC income on their personal returns. However, it's not always this simple -- for example, many states require qualifying LLCs to withhold state income tax from their profits. Consult a tax professional for the best course of action.
BTW Dept. We're the co-authors of an eGuide on the subject of out of state business. That guide provides more depth if you need it.
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