Foreign Filing Explained

In this episode of Coffee with Carl, attorney Carl Zoellner explains what it means to foreign file business entities.

Recently, I’ve received some questions about foreign filing business entities. So, let’s talk about it. First, what does “foreign filing” mean?

Foreign Filing Definition

Basically, “foreign filing” your business entity to do business in another state means filing the entity in a state other than where the entity was originally formed. First, you’ll need to know whether the entity’s activities qualify as “doing business.” Each state’s laws are a little different on this, so it’s important to look up the specific definition of “doing business” for the state in which you want to foreign file your entity.

If you look it up and determine that your business entity’s activities qualify as “doing business” in the new state, you’ll need to foreign file your entity with the new state. When you foreign file your entity in a state other than where the entity was formed, you’re basically giving the new state notice that you’re conducting business as an out-of-state entity in that state.

This additional step is not necessary for your parent companies, such as a Wyoming holding company. This is because each of the LLCs that your parent company holds should already be local LLCs filed within the state they’re doing business.

For instance, let’s say you live in Texas and own property in Florida. Before coming to Anderson Advisors, you set up a Texas LLC to hold that property. What you’ll find is that you should’ve made a Florida LLC instead. So, what you’ll do is foreign file the Texas LLC in Florida. This allows it to do business in a different state.

Sometimes, people can become hung up on the word “foreign,” which we usually think of in terms of outside the country. However, when we talk about “foreign filing,” it simply means in another state.

The Takeaway

If you have any questions about the best entity structure for your current and future investing and wealth goals, make sure to claim your complimentary Strategy Session as a reader of the ABA blog. On the call, you and a Senior Advisor will build out a customized entity structure for you. You’ll even walk away with the Blueprint of your tailor-made entity structure. You can schedule online or by calling 888.871.8535.

 

Watch as Carl breaks down what it means to foreign file business entities.

 

Resources mentioned in this video:

 

Got an idea for a future Coffee with Carl? Send it to Carl at cwc@andersonadvisors.com.

 

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