A Guide To Moving Your Business to Another State

When you’re an entrepreneur, there are different reasons you might consider moving your business. With that decision comes a host of other decisions and things to remember. There are the lifestyle logistics of moving to another state—for example, where will you live and will you get a driver’s license in your new state?

Then, there are the things you’ll have to do with regards to moving your business in particular. 

The following is a guide to the core things you should know about moving your business to another state. 

Moving office consideration

Can You Transfer Your LLC To Another State?

You could have many reasons that you’re moving your business to another state, or at least thinking about it. A big reason is because of taxes. Often business owners in high-tax states will move to a low-tax state to save money.

It may be easier to operate a business in some states rather than others because of regulations and things like employment law.

There are of course, also personal reasons that might lead you to move and to take your business with you.

So, can you even move an LLC to another state?

You do have to register your current LLC to do business in the new state you move to. 

If you move your LLC to another state, then it’s classified as a foreign LLC in the state you move to. You can do it, and it’s done frequently.

In order to make the change, you will need to submit a form to the state agency where you’re moving that deals with business filings. 

In some situations, you may just want to register your LLC in the new state you move to and leave it at that. Examples would be if you think your move is only going to be temporary or you think you’ll change states again. 

If you’re going to continue doing business in your previous state, then you would probably register your LLC as well. This allows you to keep a lot of things the same such as your employer ID number and your permanent business address. 

However, if you are located in one state and do business in another, you’ll have to appoint a registered agent who can keep up with everything, and you may have to pay taxes in both states. 

Another option is to transfer the LLC to your new state altogether. This is a process usually called domesticating an LLC. This would keep your bank and tax information the same, but you’d only have an official registered location in one state. 

Yet another option if you’re an entrepreneur contemplating a move would be to dissolve your old LLC and create a new one in your new state. There are various ways to put this into action.

What About Moving a Corporation?

So what if you’re an entrepreneur and you have a corporation

Typically if you’re moving corporate offices to a new state, you have three main options. One is to continue operating as a corporation in your old state and then register in your new state as a foreign corporation. Another option is to dissolve your corporation in your old state and establish it where you move. 

If you decide that you’re going to keep your old organization but register to do business as a foreign corporation in your new state, you’re going to have to pay double franchise taxes and possible duplicative annual report taxes. 

If you liquidate as part of your move, you may have to pay income taxes on the part of the corporation itself as well as shareholders. 

If you’re a C-corporation and you decide to reorganize instead, you may not have any tax liability with this option. 

If you dissolve a corporation including either an S or C-corporation and then make a new one or merge it, you’re going to have to go through the process to dissolve the old one. That can include preparing certain documents and submitting a filing with your old state. 

Is Merging From Your Old State To Your New State the Best Option?

Sometimes tax and financial experts will advise that merging is the best option if you want to move your business. 

To make this happen, the first step is to close your business in your old state, and as was touched on, that process is different for every estate. You’ll probably need to file a final tax return as you close it out in your old state. 

Then, once you close out your business in your previous state, you merge the business into your new state, and in many states,  you can do this online. You would register the business online, and then you would be given the option to indicate you’re merging your current company from another state. 

Some states don’t have the online option, but you can just do it with hard copy documents and mail them.

If you merge your business, you avoid potential penalties and consequences from the IRS in terms of the taxes you pay, but you still need to tell them you’ve moved your business. 

What About a Sole Proprietorship?

If you’re a sole proprietorship, which people increasingly are, then you have the same legal status as yourself. In these situations, the business and the owner are the same entity.

Therefore, if you move your business to another state, then you, as the owner let the IRS know that you’re moving.

When you do move a business, if you’re an LLC you can decide how you’re going to be taxed. If you’re making a move, the most advantageous tax option in your old state might not be the same in your new state, so you want to compare the personal and corporate income tax rates in each state. You’ll also likely need to talk to a professional before you make any major decisions if you’re able to.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

Speak Your Mind

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.