Transferring your business to another state is a complicated decision. You have to consider the costs, legal entity charges and the transfer of employees. Transferring a business to a new state requires more than normal changes.
Legal changes for the transfer of my business
First and foremost, the transfer of your business to another state would impact your legal status with both the old and the new state. The business should be registered with one or more States. For example, a limited liability company (LLC) must apply for registration by filing Articles of Organization with a state.
How to transfer my sole-proprietor business to another US state?
A sole proprietorship is considered the same legally as the owner of the business. A sole proprietorship files taxes under the personal tax return of the owner, using Schedule C to calculate the amount of business tax. As the business and the owner are the same person, the employer notifies the IRS of the transfer if the owner transfers the business to another US State.
Domestic and Foreign LLCs
A domestic LLC is registered in the state where the LLC operates and has its primary location. For an LLC, the domestic LLC is the "default" status. An LLC may also be registered as a foreign LLC in one or more other US States where it is doing business. Domestic and foreign LLC regulations vary by state.
Corporations and Partnerships
Partnerships, such as LLCs, involve multiple parties whose desires would have to be weighed when establishing a new partnership in another US State. It is also a complicated process to transfer a company to another state.
Options for transferring an LLC to Another US State
Following are some options to deal with the state registration issues for an LLC transferring to another US State:
- Continue the LLC in your old state and also set up a foreign LLC in a new state.
- Liquidate the old LLC in the former state and set up a new LLC in a new state.
- You can form a new LLC in the new state and merge the previous LLC into it.
- Another option for multiple-member LLCs can be to register a new LLC in your new state and have members shift their percentage of ownership from the old LLC to the new one.
Changes for Legal Documents for a State-to-State Move
Moving your business to a new state requires new legal documents for your business because every state has different requirements for those documents. There are two categories of documents that need to be changed:
- Formation documents: These documents are used during filling to register with a state. Each state has different criteria for Articles of Incorporation (for corporations), partnership registration documents, or Articles of Organization (for LLCs).
- Governing documents: You will also have to change the governing documents (bylaws for a corporation, operating agreement for an LLC, or partnership agreement for a partnership). These documents are used to be rewritten to meet the criteria of new state laws.