'Taking a break' found at https://flic.kr/p/ejfbeW by kleuske (https://flickr.com/people/kleuske) used under Creative Commons Attribution-ShareAlike License (http://creativecommons.org/licenses/by-sa/2.0/)
'Taking a break' found at https://flic.kr/p/ejfbeW by kleuske (https://flickr.com/people/kleuske) used under Creative Commons Attribution-ShareAlike License (http://creativecommons.org/licenses/by-sa/2.0/)
'Taking a break' found at https://flic.kr/p/ejfbeW by kleuske (https://flickr.com/people/kleuske) used under Creative Commons Attribution-ShareAlike License (http://creativecommons.org/licenses/by-sa/2.0/)

If you are a “foreign” Limited Liability Company, such as a Delaware LLC, you must register in Massachusetts if you do business here.  See Mass. Gen. Law c.156C, §54.  That’s not difficult, but it does take a bit of effort and yearly filing fees.  You must also have a registered agent within the Commonwealth.  Doing business properly and following all the rules is costly, but not doing so is riskier and can be much costlier.

Other than putting your Limited Liability Company at risk, you are not really gaining anything by not filing.  Whether or not you register, if your LLC does business in Massachusetts, you can still be sued in the courts of Massachusetts.  You can ignore such a lawsuit at your peril.  A successful plaintiff could enforce the judgment against your LLC if you have property in Massachusetts, or in your home state (see, the Full Faith and Credit Clause of the U.S. Constitution).  And if you are unregistered and/or have no agent for service in the Commonwealth, the Secretary of the Commonwealth becomes your agent for service.    

What are the consequences of not registering?  For starters, you can be fined by the Secretary of the Commonwealth: “A foreign limited liability company doing business in the commonwealth which fails to register with the state secretary shall, for each year that such failure shall continue, be fined not more than five hundred dollars.”

But will not registering prevent your LLC from enforcing its rights and filing a breach of contract or other claim?  Yes and no.  Under the statute, an LLC can still defend itself in court.  However, you will not be able to file suit as long as your failure continues.  The statute provides that: “no action shall be maintained or recovery had by the foreign limited liability company in any of the courts of the commonwealth as long as such failure continues.”

A Minnesota LLC recently tried to challenge this statute, but the Massachusetts court ruled against it.  The court ruled that the statute was valid and that a foreign LLC would have to pay the state registration fees before filing suit.  

So the takeaway is clear.  If you are a foreign LLC doing business in Massachusetts, do the right thing and register.  If you have sue in Massachusetts or you get sued, the LLC Registration fee will be the least of your worries and expenses.  This post does not address any income tax issues.

By Adam P. Whitney, 617-338-7000

awhitney@awhitneylaw.com