How to Qualify as a Foreign Business in Maryland

Thinking about doing business in Maryland? If you didn't form your corporation or limited liability company (LLC) in the state, then you'll need to complete a separate registration as a non-Maryland foreign entity.

Before you register your business, you need to know whether you need to qualify as a foreign entity in the first place. Learn whether your company needs to apply to transact business in Maryland, the forms you need to file, and the consequences of not registering. (For more general information, read our article about qualifying to do business outside your state.)

When You Have to Qualify to Do Business in Maryland

If you're doing "intrastate business" (business within the state) in Maryland as a non-Maryland entity, you must register your company with the Maryland Department of Assessments and Taxation (SDAT). Specifically, you must register:

• your corporation as a foreign corporation
• your LLC as a foreign LLC
• your limited partnership as a foreign limited partnership, or
• your limited liability partnership as a foreign limited liability partnership.

Maryland law, like with many other states, doesn't clearly define what counts as "doing business." However, Maryland does specify one activity as doing business in the state. If your foreign LLC owns income-producing real or tangible personal property in the state, then your LLC is considered to be doing business in Maryland. (Md. Code Corps. & Ass'ns § 4A-1009 (2023).)

Apart from this one activity, you'll need to look at case law to determine whether particular business activities are considered "doing business" for the purposes of qualifying as a foreign corporation or LLC. For example, the courts have said that a foreign corporation does business in Maryland "when it transacts some substantial part of its ordinary business" within the state. (Tiller Const. Corp. v. Nadler, 334 Md. 1, 10 (1994).)

Perhaps the most helpful instruction on what counts as doing business comes from a 2017 court case. In that case, the court considered four factors:

1. whether the foreign business pays state taxes
2. whether it has property, an office, telephone listings, employees, agents, inventory, research and development facilities, advertising, and bank accounts in the state
3. whether the business makes contracts in the state, and
4. whether the business manages much of its business throughout the state.

(Willow Grove Citizens Ass'n v. Cnty. Council of Prince George's Cnty., 235 Md. App. 162, 172 (2017).)

Talking to a Maryland business lawyer can also help you decide whether your business should register as a foreign LLC or corporation. An attorney can give helpful advice about whether your company should register and the potential risks of doing business in Maryland without registering.

When You Don't Have to Qualify to Do Business in Maryland

In Maryland, some activities are specifically excluded from being classified as "intrastate business." If your company participates in only these listed activities, then it doesn't have to register as a foreign business.

For both foreign corporations and LLCs, these activities—as laid out in the Maryland General Corporation Law and LLC Act—include:

• maintaining, defending, or settling an action, lawsuit, claim, dispute, or an administrative or arbitration proceeding
• holding meetings or carrying on internal affairs of the company (such as manager or member meetings for LLCs and directors or shareholders meetings for corporations)
• having a bank account
• foreclosing on mortgages or deeds of trust
• keeping, renting, operating, and controlling property
• selling or transferring property (including with the Federal Housing Administration and the U.S. Department of Veterans Affairs), and
• conducting an isolated transaction not in the course of similar transactions.

(Md. Code Corps. & Ass'ns §§ 7-103 and following (2023); Md. Code Corps. & Ass'ns § 4A-1009 (2023).)

Additionally, Maryland General Corporation Law lists two additional activities that don't constitute transacting intrastate business for corporations:

• maintaining offices or agencies for the transfer, exchange, and registration of corporate securities, and
• appointing trustees for handling corporate securities.

(Md. Code Corps. & Ass'ns § 7-104 (2023).)

Moreover, if your company participates only in foreign or interstate commerce, it's not considered to be "doing business" in Maryland for the purposes of qualifying as a foreign LLC or corporation.

Filing for Foreign Qualification or Registration to Do Business in Maryland

If you need to register your LLC or corporation as a foreign business, you'll need to file an application with the SDAT. In addition to filing your application, you must provide the SDAT with a certificate of good standing or similar document from your home state that's been issued within the last 60 days.

You can mail your completed application and certificate to the Charter Division of the SDAT or file online using Maryland Business Express. As of 2023, the filing fee for both corporations and LLCs is $100.

The application requirements for foreign corporations and LLCs are a little different.

Foreign Corporation Qualification Form

To qualify to do business as a foreign corporation in Maryland, you'll need to certify to the SDAT:

• the address of the corporation, and
• the name and address of the corporation's registered agent (unless you want to appoint the SDAT as the registered agent for your corporation)

(Md. Code Corps. & Ass'ns § 7-203 (2023).)

You can download and complete the foreign corporation qualification form provided by the SDAT. The form also asks you to provide:

• your corporation's name
• the state where your corporation was formed
• the principal address of the corporation in Maryland, and
• a statement that the corporation has or hasn't done business in Maryland before qualifying as a foreign corporation.

If you indicate in your filing that you did previously do business in the state without registering, you must include a $200 penalty (in addition to the $100 filing fee) with your registration in order for it to be processed.

LLC Registration Form

If you want to register your foreign LLC with Maryland, you must provide:

• the name of your LLC and, if different, the name the LLC proposes to register to do business in the state
• the state of organization
• the date of formation
• the general character (nature) of the business your LLC proposes to do in Maryland
• the name and address of the LLC's registered agent in Maryland (unless you want to appoint the SDAT as the registered agent for your LLC), and
• the principal address of the LLC in your home state.

(Md. Code Corps. & Ass'ns § 4A-1002 (2023).)

You can download and complete the LLC registration form provided by the SDAT. If you indicated in your application that your LLC has previously done business in Maryland without authorization, then you'll need to also include a $200 penalty with the registration form.

Consequences of Not Registering Your Business in Maryland

Under Maryland law, foreign LLCs and corporations that haven't registered to do business in the state can't file or maintain a lawsuit in Maryland unless:

• the foreign business has paid the required penalties for not registering, and
• the foreign business has either properly registered to do business or has stopped doing business in the state.

But the business can still defend against a lawsuit or proceeding in Maryland even when not registered to do business in the state.

Penalties on the business. In addition, the SDAT can impose a $200 penalty on unregistered or unqualified foreign LLCs and corporations.

Penalties on corporate officers and LLC members. Officers of foreign corporations and members of foreign LLCs that do business in the state without registering are guilty of a misdemeanor. If convicted, they could have to pay a fine of up to $1,000.

Effect on contracts. If a corporation or LLC fails to register as a foreign business, any contracts they entered into won't be affected. These contracts will remain valid and enforceable unless something else invalidates them.

(Md. Code Corps. & Ass'ns §§ 7-301 and following (2023); Md. Code Corps. & Ass'ns § 4A-1007 (2023).)

Additional Information About Registering Your Foreign Business

After registering your foreign business, don't forget to keep up with the continuing registration and tax requirements to keep your foreign LLC or corporation active and in good standing. For more on these requirements for LLCs, check out our article on LLC annual report and tax filing requirements.

Maryland's business laws can have many specifications and exceptions. If you need legal advice about non-Maryland businesses and the laws that govern them, consider talking to a business attorney.

For more guidance, read the Maryland Attorney General's Guide to Legal Aspects of Doing Business in Maryland. You can find information on how to register as a foreign LLC or corporation. You can also learn more about Maryland taxation, labor and employment law, business assistance and financing programs, and more state business topics.

The Comptroller of Maryland also provides a Starting a New Business in Maryland webpage with links to helpful resources. Maryland also has a Business FAQ page on the Business Express website.