If you want to move your LLC to another state, you have four main options: domestication, foreign registration, dissolution/registration, and merger. These have different requirements, so it’s best to consult with a lawyer for guidance before making a move.
Do you want to run your business in a different state? Maybe you have a desire to explore new markets, get more favorable tax treatment, or you’re just moving and bringing your business with you. Whatever your reason for choosing a new state to run a business, this decision carries plenty of challenges.
There are generally four approaches: domestication, foreign qualification, dissolution/formation, and merger. Let’s take a closer look and discuss how you can prepare before the move.
Domestication is the formal process of moving an existing LLC from one state to another. In other words, the domestication LLC method doesn’t end or erase the original LLC, but instead moves it to a new state. This allows the business to maintain a few key components:
Most states allow domestication/redomestication, and some have strict requirements; for example, only corporations can domesticate, or the state does not permit domestication from certain other states.
While each state has its own rules, the process typically includes the following steps:
We recommend that you consult with a lawyer to ensure you do everything correctly.
Registering as a foreign LLC allows you to keep your existing LLC, but you must register it as a foreign LLC in a new state. Foreign registration is less about moving the LLC and more about expanding it. This is because the LLC remains registered in the original state. It then obtains approval to operate in the new one.
Foreign registration is ideal for keeping significant operations in the original state. As with domestication, the key aspects of your business remain intact. The drawback is that you are required to file annually, pay fees, and maintain a registered agent in two states.
The basic process of registering a business as a foreign LLC in a new state typically consists of these steps:
If you use this method, consult a lawyer first to help avoid mistakes that you need to fix later.
When deciding how to move your LLC to another state, your initial thought might be to dissolve your existing LLC and create a new one. This is usually the most complicated method. But you might still consider it if the state you’re moving to doesn’t allow domestication, or if you're ending all ties to your current state.
Dissolving your LLC involves closing your old business in the original state. The exact process depends on your state’s laws, the Articles of Organization, and the LLC’s operating agreement. In general, dissolving an LLC may involve:
The next step is to create a new LLC. For the most part, you will follow the same steps as you did when creating your original LLC
Talk to a lawyer before doing anything permanent, such as dissolving your existing LLC or obtaining a new EIN. You want to confirm everything is above board before completing the move.
Merging means creating a new LLC, then using it to integrate the existing LLC. It’s ideal for businesses that wish to start in a new state, but keep existing business relationships and contracts.
Merging a current LLC into a new one normally follows this process:
The Articles of Merger is a document that basically absorbs the old LLC into the new LLC. In the eyes of the law, the old LLC stops existing. Assets, liabilities, and contracts of the old LLC become the responsibility of the new LLC.
Moving an LLC through merger has benefits and drawbacks. It’s an option if domestication isn’t available. Another benefit is that it’s ideal for business owners who might wish to keep existing business relationships and finances as intact as possible.
The key drawback with a merger is its complexity. There’s a lot of paperwork and administrative tasks to complete. These usually require the assistance of a lawyer and/or tax professional.
Moving to a new state means moving to a new regulatory environment, with new costs, taxes, and a different local economy. There’s a lot to check before you make the final move, but here are a few key points:
Every state has its own laws and tax rules, such as entity governance requirements, corporate tax rates, and sales tax filing requirements. Make sure you understand the new rules that apply to your LLC and check that higher taxes or increased tax filing requirements won’t outweigh any financial benefits you gain from moving your LLC to a new state. It’s also important to consider the annual report fees, which vary widely by state.
One of the requirements for forming an LLC is having a physical address where a registered agent can receive legal documents. You can serve as your own registered agent if you have a physical address in the state of formation, but if not, you may need to use a professional registered agent.
Many businesses need various certifications, permits, and licenses. This is particularly true for workers who offer professional services, like contractors. If this applies to your business, most of these won’t automatically transfer to a new state.
Also, don’t forget the tasks that might seem clerical and not have a high priority. For example, you’ll want to update your business’s website, business cards, and insurance policies. There may also be contracts with customers and clients that your LLC must modify.
Now that you know what LLC transfer options are available, you can start thinking about which method to use. When you have a question or concern about the move, consulting a lawyer can help.
A LegalShield® Membership can connect you with a provider law firm who can provide essential legal guidance and review the necessary paperwork.
There are a variety of LegalShield Small Business Legal Plans to help meet your legal needs.
You will usually need a new EIN if your business transfer involves creating a new LLC in the new state. Typically, you can keep your old EIN if the LLC transfer uses domestication or foreign registration. Before getting a new EIN, it’s a good idea to check with your accountant or CPA.
The process of moving an LLC to another state also depends on the method you choose. It may be a few weeks to a few months.
All states require that you keep your entity information current, with time frames set to make updates with the state. Also, doing business in a state where you are not registered or formed can have monetary consequences, such as fines and penalties.
Sources:
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