What are the implications of US LLC state and foreign entities?

Question

Let's say I'm a confetti enthusiast. Confetti for parties, confetti for halloween decorations, confetti for everything. In this hypothetical example, I want to sell confetti online, and in person when I have the opportunity to make sales. My partners and I make the confetti in Texas, and we sell it online across the country and in person in, say, New Jersey and Connecticut.

If we were to incorporate Wonderful Confetti LLC in Delaware, and I did actually check it's available — for the sake of the question of course — could I manufacture my confetti in Texas, sell it in person and through local retailers in New Jersey and Connecticut, and online through platforms like Shopify across the country? Would I need to register as a foreign entity in the states of manufacture or sale, if all of us confetti enthusiasts are partial owners and not employees? Where's the line?

Answer 1

Yes - if you were to incorporate in Delaware, you could sell it freely wherever you want. In general, for this kind of business, you would only need to register as a foreign corporation in states where you have employees or real property (like an office or warehouse - whether owned or leased). Most likely, that's the end of it. If you have lots of partners who look an awfully lot like employees and this comes to the attention of a particular state where these partner-employees live, then your problem is going to be getting nailed for failing to classify these people as employees. The lack of a foreign qualification would be an afterthought.