Do I need to register my LLC in every state?

Land Investing
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Hi all,

Sorry if this question has been asked a million times. If someone knows a good article, I’d really appreciate it if you could send me the link.

I heard recently that if you are an out-of-state LLC and you run into legal trouble, your personal assets could be at risk. Is this true? I know the best course is always to consult an attorney but I’d appreciate any insight from experienced investors on this topic.

If true, how can you remedy this? Do I need to register my LLC in all the states where I do business? I know legal action in land investing is rare but I would like peace of mind if possible.

Thank you!

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@tmillen I was told the same thing by someone on the RETipster group on FB… Curious to see what others have to say.

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I’ve heard this question come up a few different times over the past couple of months and I’m honestly not 100% clear on the answer at this point.

When my attorney explained it to me years ago (back when I wrong this article), he never conveyed that I would lose all legal protection if I didn’t register properly. It was more an issue of me being unable to pursue recourse against another party if I wanted to go after them.

BUT, I don’t recall ever asking this specific question about whether I would lose all corporate protection… so I can’t say for sure. Either way, I’ve got it on my to-do list to try and get this question answered definitively (if that’s even possible). I’ll try to remember to post here if/when I get better feedback on this.

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Seth - that would awesome! Thank you for looking into this.

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@retipsterseth Thank you Seth, it does get very costly to register LLCs in every states and having an answer would be indeed very useful.

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I just got an answer back from an attorney regarding the consequences of NOT registering as a foreign entity in another state. This is what they told me, verbatim:

If you don’t register [as a foreign entity in another state] then you cannot pursue any legal claims in the state. You can still be sued and your entity will remain intact but you can not file any counter-claims or cross-claims. If a contractor stiffs you on a rental rehab and your LLC was not registered in the state, the contractor could get any case dismissed on these grounds. You can always register and then bring a claim.

Based on this (which came from an attorney, not me), my non-legal interpretation is that if you neglect to register as a foreign entity in another state, this wouldn’t necessarily be catastrophic unless it suddenly becomes important that you have the ability to pursue legal action against another party.

Your LLC would still hold up and protect you even if you’re not registered as a foreign corporation in another state.

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@retipsterseth Seth! I can’t thank you enough for this. Knowing this will help me sleep better at night. I suppose if you are only operating in a few states, it’s worthwhile to register as a foreign entity.

Thanks for all that you do!

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@tmillen Here in the Golden State the state wants some of your gold. This is an excerpt of an article by EzerWilliamson law firm in LA.
… 'As we discussed in our blog last week, a foreign corporation or other business entity transacting business within California must comply with the certification requirements of Corporations Code § 2105 and obtain a Certificate of Qualification. As set forth in the following list, the consequences for failing to comply with the California Corporations Code (the “Code”) can be harsh.

A foreign entity is not permitted to maintain an action or proceeding within California regarding business transacted intrastate until it comes within compliance of the Code.

Transacting unauthorized intrastate business is deemed as consenting to the jurisdiction of California courts in any civil action arising in California in which the entity is named as a defendant.

The entity may be subject to a per diem (per day) penalty of $20.00 for each day that unauthorized intrastate business is transacted.

Prosecution may be brought by the California Attorney General and an additional money penalty may be sought against the entity.’

Twenty bucks a day could add up in a hurry and they may come after you for more if you fail to file and ‘give at the office’ up front. I suspect other states may have similar control requirements.

There is also a list of actions an entity is allowed to take that are not considered ‘transacting business’. Buying and selling land is not on that list but buying or selling a note secured by that land may be ok.

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