Preparing to relocate your business to another state requires more than following a moving checklist. You must plan for how you will relocate your business entity. There are three options available to incorporated businesses for changing their state of formation.
- Dissolving the existing LLC or corporation in its original state of incorporation. Then, incorporating or forming an LLC in the new state.
- Merging the old LLC or corporation with an LLC or corporation formed in a new state.
- Filing a foreign qualification.
1. Dissolution and Formation: How to Move Your Business to Another State
Dissolving a business means formally closing the business with its state of incorporation. It is necessary to end the legal existence of your business in a state where it no longer plans to do business. Otherwise, the state of incorporation will consider the business to still be active. As a result, the business must pay state fees and taxes and file annual reports.
Dissolving a business, while a voluntary action, requires all members to agree on the decision. You may return to key documents, such as an LLC’s operating agreement or corporate bylaws for a corporation, to determine the protocol for properly dissolving the business. Generally, a meeting is held where members vote to dissolve and minutes are taken on the resolution’s outcome.
Once you receive majority vote to dissolve the entity, follow the necessary steps for dissolving the business. This includes filing articles of dissolution with the current Secretary of State, sending notices and cancellations in a dissolution proposal, paying back creditors, settling debts, and distributing assets accordingly to owners and members.
After a successful dissolution, the owners or members may form a new corporation or LLC in the new state. Remember to follow the rules presented by the new Secretary of State to ensure your new LLC or corporation stays in compliance in its new state of formation.
2. Merging Your LLC or Corporation: Another Way to Move Your Business to Another State
Not sure if filing a dissolution is the best decision for your corporation or LLC? You may choose to change a state of formation using a merger.
A merger is essentially a reorganization. You would form a corporation or LLC in the new state where you plan to do business. Then, you would merge the old corporation or LLC into the new entity formation. The old LLC ceases to exist. Its owners become the owners of the new LLC and its assets vest in the new LLC.
Most states have laws which permit entity formations, like LLCs, to merge into another LLC. If you’re interested in potentially using a merger, you will need to follow the guidelines placed by the new state of incorporation’s LLC and corporation laws.
3. Foreign Qualification: How to Transfer Your Business to Another State Without Dissolving
What if neither option sounds like a fit for your business? What if you are relocating to a new state to do business, but plan to keep doing business in your old state?
There’s another alternative available. Rather than change your state of formation, you can file a foreign qualification in the new state.
Filing a foreign qualification allows you to keep your old entity, like an LLC, and register it as a foreign LLC in the new state.
A foreign entity will need to obtain a certificate of authority from its existing Secretary of State. This document shows the business is authorized to do business in a state different from its state of formation. You will need to obtain a certificate of good standing from the Secretary of State. This acts as proof your business is in good standing with its state of incorporation. Pay the filing fees during the registration process.
Additional Steps to Consider When Moving a Business to Another State
Changing the state of formation is just the beginning for small businesses relocating to new states. Here are a few additional housekeeping areas:
- Cancel local business licenses and permits. Apply for new business licenses and permits in your new state.
- Close your existing business bank account. Reopen another account. (This is only applicable if your bank is regional and does not have nationwide branches.)
- Apply for a new DBA in the new state. Withdraw your existing DBA from the old state.
- Alert authorities at the federal and state level. Reach out to the IRS with Form 8822 and the local Secretary of State with your up-to-date business address.
FAQs
How do I relocate my business to another state?
Relocating your business to another state involves several steps, including registering with the new state’s business authorities, obtaining the necessary licenses, and dissolving or converting your existing business entity. Depending on your business structure, you may need to file for a new EIN or transfer tax registrations. Consulting with legal and tax professionals can help ensure compliance with state regulations.
What are the benefits of transferring my LLC to another state?
Transferring your LLC can provide tax advantages, access to a larger customer base, and better business opportunities. Some states offer lower filing fees and fewer regulatory requirements, making operations more cost-effective. Moving your LLC also allows you to maintain your business’s legal continuity while adapting to a more favorable business environment. Researching state-specific benefits can help you make an informed decision.
How long does it take to transfer an LLC to another state?
The timeline for transferring an LLC varies based on the process you choose. Filing for a foreign qualification typically takes a few days to a few weeks, while a statutory conversion or domestication can take several weeks or months, depending on state requirements. Processing times may also be affected by government backlogs, so planning ahead is key.
Can I transfer my LLC without physically moving my business?
Yes, you can transfer your LLC without relocating your operations. Many business owners move their legal entity to a new state for tax benefits, regulatory advantages, or business expansion while keeping their physical presence elsewhere. Options like foreign qualification allow you to operate in multiple states without dissolving your original LLC.
What happens to my employees when I move my business to another state?
If your business has employees, you’ll need to comply with the new state’s labor laws, tax requirements, and workers’ compensation policies. Some employees may need to be reclassified under the new state’s employment laws. If your business is fully remote, you may not need to make significant changes, but payroll and tax registrations must be updated accordingly.
Relocate a business entity with MyCorporation. Contact MyCorporation at mycorporation.com or give us a call at 877-692-6772.