What You Should Know About Moving Your Business to Another State

We’ve put together several options to change your business entity’s state of formation. So, if you’re relocating to another location and want to take your company with you, learn more about your possibilities.

Things to Know When Moving a Business to Another State

You could have plenty of reasons that you’re moving a business from one state to another. One of the most common is because of taxes. On the other hand, it may be easier to operate an enterprise in some states than others due to regulations and employment law. The process of relocation will be formed depending on the types of corporate organizations.

But first things first. Let’s find out what are the three basic types:

• A corporation – the owners are shareholders, and some of them might be executives or employees. They are paid to perform their duties and receive shareholder dividends as well.
• Multiple-owner businesses – they are owned by several individuals and include partnerships and limited liability companies
• A single-owner business – the only one person is an owner, and this type can also include the single-owner LLC enterprise

Depending on your goals and type of assets, there are several reasons why you would like to change your enterprise’s address:

• Labor and workforce issues
• Desire to reach new markets
• Yearning to upgrade equipment or facilities
• Need to lower costs or increase cash flow
• The better quality of life

Wherever you choose to move, one thing is for sure – this process requires patience, time, and faith. Laws, conditions, and terms differ from place to place, so be ready to roll up your sleeves and do all the necessary tasks when relocating your establishment to another address across the borders. Let’s find out what these tasks are.

Consider These Options when Transferring LLC Formation to an Another Location

First, you need to keep an old LLC and register in a new place for a temporary move. You should consider a few more options depending on your possibilities and plans, including domesticating an LLC process (transferring an LLC from one state to another due to permanent move) or dissolving your old enterprise and creating a new one in your prospective destination.

However, before you move, think about consulting an attorney in your future state. He can help you handle some of the logistical details and ensure the transition goes smoothly and fulfills all the new destination requirements.

Move Your Company as a “Foreign” to Desired Location

As the easiest and least expensive solution, you will technically have two companies registered in two states. The first one, created in your original state, after filing a “foreign company” in a different location, still exists. Although this option is inexpensive and can be set up quickly, there are several drawbacks:

• A foreign filing is not a new company
• You may have to pay additional taxes
• You’ll need to keep up with each state’s reporting requirements and LLC filing

Abandon Your Old Company and Start Over With Its Assets

This is probably the most popular way to move your enterprise. When you decide to form another business, you simply dissolve the former one. This process is straightforward but has some disadvantages. By abandoning your original corporation, you give up its FEIN (Federal Employer Identification Number) and all credits that have been built over the years.

If your intentions are clear, and you’re sure this approach is the best solution, keep in mind that closing your company should be done properly:

• These steps vary for individual states and consider a competent business attorney’s help to do things right
• Before dissolving your old enterprise, you should form your new business entity and take up all the assets and liabilities while the original one still exists
• Get a new FEIN and open up another merchant and bank accounts
• Obtain a fresh working permit
• It’s essential to contact the IRS (Internal Revenue Service) and notify about the change

Merge Your Business into a New One

Do you want to preserve your FEIN and credit established by the old enterprise? In case you do, this approach involves the same steps as when abandoning your previous company and start over, but it has some additional steps:

• Filing appropriate “Articles of Merger”
• Paying the applicable fees in your desired location
• Forming startups in your new environment and merging the preceding operating organization into an amalgamated entity

Of course, you should perform a merger before closing and dissolving your old enterprise. After this process, the old entity will no longer exist and will become the fresh one with all the old company’s assets and liabilities.

Follow State’s Procedure and Perform “Foreign Entity Conversion”

Before you formally transfer an LLC from one destination to another (known as domestication), make sure if it’s permitted by both states – the one you’re leaving and the one you’re moving into. In some states, it’s called conversion, and it’s based on a statutory transaction.

In case your state allows domestication, this can be the easiest and best way to undertake an LLC move.

It is a one-entity transaction, and there’s no need to form another enterprise or corporation in the desired location or transfer any properties from one entity to another. You can transfer your things by getting a certificate of good standing, which is known as a certificate of subsistence. This certificate affirms several facts about your corporation:

• That it exists in the original state’s registry data
• That it has achieved its filing obligations
• That it is legitimate to operate in the original destination.

This approach is usually less expensive than the merger, and you also preserve the company’s credit, the FEIN, etc.

Tax-Related Issues When Moving Your Old LLC as a Foreign to a New Location

Your LLC can be taxed as a partnership, sole proprietorship, or corporation. Keep in mind that different states have different personal and corporate income tax rates. That’s why tax classification might be a bit confusing if you are unfamiliar with it. It’s useful to contact an accountant, ask for his services, and exchange words of advice about tax consequences your move can bring you. If you like, you can change your LLC’s tax status – all you need is to file Form 8832 with the IRS.

Moving a Business from One Location to Another Means New Legal Documents

When relocating LLC, how to organize important papers might be one of your biggest fears. Every move across state boundaries requires changes for legal documents. Keep in mind that each state has its specific requirements. You should visit your state’s Secretary of State website for more information on the demands for some types of documents, as well as consulting an attorney for some other types of documents.

Each Destination Has Its Terms and Conditions for Different Business Entities

When you move and relocate your enterprise, it’s important to follow the rules of your prospective location, because different states have unique rules for various undertakings. Relocation somewhere where you’re not familiar with current terms and conditions means the change of legal documents, which differs from region to region. Still, two main types of paperwork that should be your concern are:

• Formation documents – you file them to register with a state, and there are different requirements for partnership, corporations or LLCs (Articles of Organization)
• Governing documents are bylaws for a corporation, partnership agreement for a partnership, or an LLC operating agreement. These types of documents must be rewritten in order to meet the new state’s law requirements.

Some Additional Money- and Time-Saving Tips for Relocating Your LLC

Relocating your firm is not just overwhelming, but it also might be expensive and time-consuming. However, here are some handy tips to help you prepare for the upcoming move – to organize your time, and find out how much money you should save to move across borders:

• Donate office supplies and items you don’t need
• If you’re relocating DIY, start packing earlier
• If you’re hiring professional movers’ services, call ahead of time
• Label and number your boxes and packages
• Be careful when packing computer cables
• Your electronics require special wrapping and packing procedures – pack them separately
• Get insurance coverage and protect your belongings
• Inform all your friends, work colleagues, and relatives and update your address
• Make a relocation expenses checklist of everything that must be done

Moving an LLC to a Different State Is Straightforward, but You Shouldn’t Be Hasty

Moving a business to another state is usually a simple process. But, before you schedule the relocation date, and hire professional movers, consider all your options about your intentions. Also, contact an accountant and ask for advice on the tax consequences of changing states.

Simply put, the decision to move your enterprise to another location should not be taken lightly – it’s essential to consider all the factors related to relocation and make the best choice for all stakeholders involved. When moving to a new destination, keep in mind that following the guidelines for the state you’re relocating out and the one you’re relocating into are essential. As soon as you find out all the requirements for moving your business across the borders, you can successfully move on with your undertaking.

Depending on what you do and where you move, you might also be in a situation to jump through hoops to maintain your license. No matter what you end up choosing, having a permanent place of residence can make it easier for your enterprise to survive the transition with a minimal operational pause.