Key Takeaways:

  • You can live in one state and operate or own an LLC in another.
  • You'll likely need to register as a foreign LLC in the state where your business operates.
  • Registered agents and state-specific compliance are required in each operating state.
  • Tax obligations, licenses, and fees may apply in both the home and foreign states.
  • Virtual offices and remote management are common solutions for out-of-state LLC owners.

LLC partners in different states can be quite common for partnerships that do business across state lines. Specifically, the LLC, or limited liability company, is a type of business structure that provides for great flexibility in terms of management and oversight. There are instances when LLCs join together with other business types and individuals to oversee a partnership. If this is the case, then the LLC itself is a partner in the partnership.

Unlike the typical LLC or corporation, there are no formal rules for establishing a partnership. So long as the partners hold themselves as partners by doing business with other parties, sharing profits, and sharing the overall responsibility of the business obligations, a partnership is likely established.

However, living in different states could be cause for complication when overseeing and managing the partnership, primarily due to the differing business laws in different states.

How to Prove a Partnership Across State Lines

You can prove that a partnership exists by doing the following:

  1. Engage in emails and phone calls with one another.
  2. Enter into business contracts with each other and other parties.
  3. Choose the state in which the business will operate.
  4. Obtain necessary licensing and permits.
  5. Hire employees who will work for the company; this further establishes credibility of the partnership itself.
  6. Draft a written agreement between partners.

Choice of Law

In regard to choice of law, this means that you will have to choose which state will have control over your partnership. Keep in mind that partnership law is very similar from state to state, as it is generally governed by the Uniform Partnership Act (UPA) or some variation thereof. In fact, most states, with the exception of Louisiana, have adopted either the 1914 or 1997 version of the UPA.

The UPA doesn’t have strict guidelines for how the partnership can be operated or managed. The law doesn’t limit the ability of any partner to engage in business with any other type of entity, nor does it restrict what types of individuals or businesses can become partners. It also doesn’t set geographical limitations for any of the partners. Therefore, there is still great flexibility in terms of the managing of a partnership with partners that reside in different states.

Agreements

There is no formal written agreement that must be drafted in order to form a partnership. Under the UPA, if two or more persons begin co-running a business for profit, then they are operating a partnership. While there is no written requirement, it is a good idea to have a written agreement in place to prevent any potential legal disputes down the line. If a legal dispute does arise, the court will look to the applicable state law, along with any written agreements, to resolve the dispute among the partners.

Operating in Different States

If you do conduct business in more than one state, you might be required to register in that other state in order to begin doing business there. Even though there is no formal formation requirement for establishing a partnership, you will still need to register and obtain licensing and applicable permits before doing business in any state.

For example, if you create a partnership and use the business to own and operate a restaurant, you can’t simply begin selling food to patrons without the appropriate registration, licensing, and permits. If you then choose to open a restaurant in another state, you will need to obtain foreign registration in that state as well.

If you do operate in other states, you need not form a partnership in those other states. You are free to create a different type of business structure, such as an LLC or corporation among the partners. However, if this is the case, the business will need to follow the state’s requirements for formation. Therefore, the partners creating an LLC in another state will need to choose an appropriate business name, obtain a registered agent, file the articles of organization, obtain an Employer Identification Number (EIN), draft an operating agreement, and obtain additional licensing and permits if applicable.

Best Practices for Managing Multi-State LLCs

When managing an LLC with partners or operations across different states, it’s important to follow best practices to remain compliant and efficient:

  • Clarify Roles in the Operating Agreement: Clearly define which partner is responsible for compliance, tax filings, and local business management.
  • Maintain Good Standing in All States: File annual reports, pay required fees, and renew licenses in both the home and foreign states.
  • Centralize Communication: Use shared digital platforms for documentation, decision-making, and recordkeeping.
  • Consult with a Tax Professional: Multi-state taxation is complex. A CPA or tax attorney can help navigate nexus issues and apportion income properly.

Can I Live in a Different State Than My LLC?

Yes, you can live in a different state than where your LLC is registered. Many entrepreneurs choose to form their LLC in states like Delaware, Nevada, or Wyoming due to favorable tax laws or privacy benefits, even if they reside elsewhere.

However, if your LLC operates or transacts business in your home state, you must register the LLC as a foreign entity there—even if it was formed elsewhere.

Key considerations include:

  • State Taxes: You may owe income, franchise, or sales tax in both your home state and the LLC's state, depending on operations.
  • Licensing: Local business licenses may be required in the state where you live or where you operate.
  • Mail and Address Handling: A registered agent is needed in each state where your LLC is authorized to do business.
  • Virtual Presence: Using a virtual office or mail forwarding service can help manage the LLC remotely, but cannot replace required legal registrations​​.

Understanding Foreign LLC Registration

If your LLC is formed in one state but conducts business in another, you may be required to register as a foreign LLC in the state where the business operates. This process is called foreign qualification and ensures your business complies with local laws and tax requirements.

Common activities that may trigger foreign registration include:

  • Maintaining a physical office or storefront.
  • Hiring employees who work in the other state.
  • Holding regular meetings or making business decisions in the other state.
  • Owning or leasing property in that state.

To register as a foreign LLC, you generally must:

  • File a Certificate of Authority with the Secretary of State.
  • Pay the required filing fees.
  • Maintain a registered agent in the state.
  • Provide a Certificate of Good Standing from your home state.

Failure to register may result in penalties, fines, or the inability to enforce contracts in that state​​. 

Frequently Asked Questions

1. Can I form an LLC in a different state from where I live? Yes. Many people form LLCs in business-friendly states like Delaware or Wyoming even if they live elsewhere. However, foreign registration is often required where the LLC operates.

2. Do I need a registered agent in both states? You need a registered agent in every state where your LLC is authorized to do business, including both your home state (if applicable) and the state of formation.

3. Will I pay taxes in both states? Possibly. If you live in one state and operate the LLC in another, you might owe taxes in both depending on where income is earned and where nexus exists.

4. What if I run the LLC entirely online from my home? Even if your business is online, the state where you physically conduct business (your residence) may consider you to be transacting business and require foreign registration.

5. Can multiple partners in different states run the same LLC? Yes. LLC members can reside in different states. Clear agreements and proper foreign registrations help maintain legal compliance.

If you need help with LLC partners in different states or forming a partnership or registering for foreign qualification in a state other than your home state, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.