There are times when business owners must relocate their business entity to a new state, and there's a lot of work to do!
Some of these include location scouting, tax forms, and other tedious processes associated with the transfer.
But what happens to your LLC if you move from one state to another? Several procedures must be completed for your LLC to be registered in another state.
Why Would a Business Redomisticate?
Redomesticating shouldn't be undertaken without a thorough understanding of state tax and liability laws, as well as the time and expense involved.
For some companies, there can be many incentivizing factors for moving into another state. Here are some common reasons for redomestication:
- Lower business cost
- Better opportunity to meet customer needs
- Expansion/growth opportunities in another market
- New location (one that provides a better lifestyle, lower cost of living, or more conveniences)
However, the most important thing to remember is that you'll need permission from all members of your LLC to switch states—and that might include members who don't live in the U.S.
4 Steps To Move Your LLC
Depending on the state, redomestication may be a bit more or less difficult. Before proceeding down the road, it's important to understand what will take place and to enlist the assistance of an attorney and tax specialist.
Business owners must usually follow these stages:
Step 1: Register Your Business In The New State
Most business owners will need to register the new LLC with the Secretary of State or another designated office in their desired state.
Registering your company with the government is easy enough, but you must file all information requested on any forms provided by the new state's registration office.
Failure to do so may result in fines and penalties for your company -- even if you aren't trying to redomesticate it.
Step 2: Incorporate The New LLC
In most cases, the process of incorporating a new company is very similar to that of registering an original one.
You must file articles of incorporation and any other documents required by your state's laws.
Again, this process will probably require filling out forms, paying the filing fee, and providing information to the incorporation office in your new state.
Once you've reincorporated your company, you'll need to obtain new bank accounts, a new Tax ID number, and licenses with the state.
You must also notify any third parties that do business with your LLC of the change in designation—including office suppliers, utility companies, insurance companies, and even vendors that provide corporate apparel.
Step 3: Create Operating Agreements And Member Registrations:
You should create an operating agreement for your new LLC during this process so that you remain compliant with the redomestication laws of your new home state.
You should also update any registration forms for members or managers of your company if they differ from the forms your state uses for newly-incorporated businesses.
Step 4: Dissolve The Old LLC
If you are dissolving your LLC, make sure to file the appropriate paperwork for this action in your state.
Although your business will likely be taxed at a single-member rate if it is dissolved, additional steps must be taken when closing an LLC.
These include notifying any creditors or consumers you have done business with or vendors or service providers you haven't paid.
You should also notify any business partners of the LLC's dissolution unless an operating agreement prohibits this.
Alternative Option: File as a Foreign LLC
Many business owners who are redomesticating their companies may want to retain the LLC they originally formed.
This is an option, but it's important to understand that you will not keep your original company name without following additional steps.
However, you must file for a Certificate of Authority (Foreign qualification) with the state of residence for your new business.
Your new LLC must file as a foreign business in your old state. You must also make sure with the state agency that all your business filings fit the criteria of foreign qualifications.
Doing this will allow you to maintain the same name and permanent business address.
The foreign LLC can also use your original tax information when filing all state, federal, and other required returns.
Additionally, you may have to provide information on where the original business was originally formed and why it moved.
If you were required to pay franchise fees within that state, these would also be transferred.
You must notify any creditors or local agencies that have registered your name with a trademark.
This is the more involved route of redomesticating, but it also comes with its own set of tax advantages.
These include lower franchise taxes and no obligation to pay income tax on foreign income.
- You may also avoid a lot of paperwork and administrative fees in transferring your company name.
- Potential for lower franchise and income tax costs with the state of your new permanent residence.
- Although federal taxes will still apply if your permanent state of residence has an income tax, this is only required with companies making more than $600 in taxable income per year.
- It's still possible to use the same Employer Identification Number (EIN), permanent business address, and business accounts.
- It takes a lot of time and paperwork to make this change.
- You'll also have to supply the name and permanent address for your original company, as well as its registration number, where it was formed, and why you are moving. You may also need to provide a copy of your old LLC's operating agreement.
- In addition, if you have filed any legal documents under the original name, these will have to be legally dissolved before the new permanent state is revealed.
- If you're considering making this move, you'll also need to consider what kind of tax consequences may arise.
Be sure to familiarize yourself with any new labor or tax laws that may apply to your company, as these are likely different from those enforced by your former domicile.
Always make sure to seek legal advice before taking any decision regarding transferring your business.
Related Article: How to Transfer Ownership of an LLC
Can I Move My Multi-Member LLC to a State That Doesn’t Allow Single-Member LLC's?
No. Your multi-member LLC must re-domesticate in a state that allows multi-member LLCs and allows single-members if your company is moving from a state that does not allow them.
How Much Does It Cost to Move My LLC?
The costs vary by state and depend on the amount of paperwork required. Legal fees for re-domesticating an LLC can be as low as $500 and as high as $5,000.
What Type of Law Applies to My Company After I Re-Domesticate?
Upon re-domesticating into a new state, you will immediately be bound by all the laws of your new jurisdiction.
It's important to research these laws and follow them to the letter once your company moves.
Will My Current LLC Be Good in Both States?
No. Your original state will probably not recognize the move as legal; this means there's a chance the state will dissolve the company.
How to Move an LLC to Another State...
If you're considering re-domesticating your LLC, then it's best to consult with a business lawyer and an office of the Secretary of State in both your original state and new state.
Make sure that all fees will be worth the time and money saved.
You may also want to do more research on the impact this move could have on your company's taxes.