What do you do when you have a limited liability company (LLC) in one state and want to move it to another? When moving a business to another state, you must first register your establishment to operate in your new environment. But paying the applicable fees and taxes for your LLC in two different destinations might get expensive. Maintaining two separate entities might be too costly and complicated, so you might consider choosing one of the other alternatives you have for relocating your company.
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.
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:
Depending on your goals and type of assets, there are several reasons why you would like to change your enterprise’s address:
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.
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.
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:
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:
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:
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.
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:
This approach is usually less expensive than the merger, and you also preserve the company’s credit, the FEIN, etc.
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.
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.
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:
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:
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.
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