If you’re a small business owner, you know the importance of protecting your company from liability. One common way to do this is by forming a limited liability company (LLC). However, what happens if you can’t register your LLC in every state where you do business? Fortunately, there are legal alternatives that can help protect your business.

Option One

One option is to form a corporation. Like an LLC, a corporation offers protection from personal liability for business debts and legal judgments. However, corporations are subject to different tax rules and require more formalities, such as holding regular board meetings and keeping detailed records.

Option Two

Another alternative is to form a limited partnership (LP). In an LP, there are two types of partners: general partners and limited partners. The general partners manage the business and are personally liable for its debts and obligations. Limited partners, on the other hand, invest in the business but have limited liability. This means that they are not personally responsible for the debts and obligations of the business beyond the amount they have invested.

Option Three

A third option is to form a limited liability partnership (LLP). An LLP is similar to an LP, but all partners have limited liability. This means that each partner is protected from the debts and obligations of the business that other partners incur.

Option Four

Finally, you may consider purchasing liability insurance. Liability insurance can help protect your business from legal claims and judgments. It can cover things like bodily injury, property damage, and personal injury. While liability insurance won’t protect your personal assets, it can help protect your business assets and provide peace of mind.


If you can’t register your LLC in every state where you do business, legal alternatives are available to help protect your business. Consider forming a corporation, limited partnership, or limited liability partnership. Or, purchase liability insurance to help protect your business from legal claims and judgments. It’s important to consult with a qualified attorney or accountant to determine which option is best for your business.

Video Transcript

If I can’t register my LLC in every state where I do business, is there anything else I can do to protect myself from unknown lawsuits? Another way to put this is, if I don’t want to register my LLC in every state where it does business, is there anything else I can do to protect myself from unknown lawsuits?

Okay, What Is This Question Talking About?

If you have an LLC in Minnesota and you do business in New York and California as well, like, for example, you might sell the customers there. You are required under New York law and California law to register your LLC in New York as a foreign LLC, and you are required to register your Minnesota LLC in California as a foreign LLC.

Why? Because if you ever get sued there, parties have a right to serve that lawsuit on the state government like the Secretary of State. Every state designates who can receive that lawsuit. And if you are not aware of that lawsuit because you are not registered there, you will never know that you need to respond.

A Real Example

So here is a real example. Many years ago, a company contacted me, and they said we just found out that there was a lawsuit against us in Minnesota, and we lost, and it was a bogus lawsuit. It claimed we engaged in racial discrimination, which we didn’t. And we have got all sorts of defenses, but because we didn’t even know about the lawsuit, we, of course lost. And the other side won by default. What can we do? And I said, “Well, how did you find out about this? Because ultimately, you did find out.” They said, “We found out because they froze our bank account here in this other state.” So I said, “Oh, wow.” And it was a lot of money. And there is a process to try to undo a judgment when it has already been issued, and you didn’t know about it.

But usually, it is very difficult to win. The odds are stacked against you. So, if you want to avoid that sort of scenario, you need to register in the states where you are doing business. So, for example, if this company had registered in Minnesota, then when the lawsuit was commenced against them, and the Secretary of State in Minnesota would serve the lawsuit documents, the Secretary of State would have known who to send those documents to, and the company could have hired an attorney to defend them.

How to Manage the Risk

So the risk is if you don’t register in other states where you are doing business, you may never know about the lawsuit there. But what was the question? The question is, Okay, if I don’t register, is there anything else I can do to protect myself from unknown lawsuits? Probably the best thing you can do is make it really clear to whoever might be contacting you who they should contact if they have any issues or disputes. So at least you are aware of the issues, and it is not like an unknown lawsuit will be brought against you.

One other thing you could consider doing, and that is you could consider having an arbitration clause or a venue clause in your contract with people. Not every lawsuit is based on contracts and breach of them, but to the extent you are selling to customers, you can have what is called a shrink-wrap contract in there, which says, for example, if they want to sue you, they must sue you in your state, and you could even say it must be in one of the arbitration forms, so JAMS or American arbitration association. So, in other words, rather than being able to commence a lawsuit in New York district court or California district court under the rules of the contract, they have to commence the lawsuit in your home state or in an arbitration venue.


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