October 18, 2022
So…you’re moving! Congrats! Flexibility is just one of the many perks of being your own boss, amirite? Maybe you’re moving to another state to be near loved ones or to explore a brand new area. Whatever your reasons are, it’s important to consider your options for moving your business, too.
Quick disclaimer that the options we talk about below vary by state and by business, so make sure you look up the rules for your new home. Now, let’s talk about how to move your LLC to another state.
When you move your LLC to a brand new state, your biz is considered a “foreign LLC” in that state. Your business is organized in one state and registered to business in your new state.
This is an acceptable option; many businesses actually do this and choose Delaware as their business’s “home” thanks to tax benefits and other advantages. If your move is temporary or if you plan to move back to your previous state, you might like this option the best.
Pros: Registering your LLC as a foreign LLC lets you keep the same employee identification number or EIN. You can also keep your business address and bank accounts while your LLC does business in your new state.
Cons: This is probably the most expensive option since you’ll have to pay the appropriate taxes and fees in your old stateandnew state. You’ll also have to pay state taxes in your new state, an annual fee, plus filing fees and registration fees. These costs can pile up fast.
All of these fees and requirements vary by state. If it’s too expensive to maintain filing, reporting, and taxes in both states, consider one of the following options instead.
What if you’re planning to build a new business? Your best bet in this case is to dissolve your old LLC. When this happens, your old LLC no longer legally exists.
The rules and processes for dissolving your LLC vary from state to state, of course. Plus, it will depend on your LLC’s operating agreement contract, which should contain rules on how to dissolve your biz.
Pros: Dissolving your old LLC and starting a new one may be less pricey than Option #1. If your new state doesn’t allow domestication (more on that in a moment), this option is a good alternative.
Cons: In case you couldn’t tell, this option is aweebit more complicated, so you may need help from an attorney to do it. You’ll also need to establish a new tax ID number, new bank accounts, the whole shebang.
You don’t have to dissolve your previous LLC once you’ve formed a new LLC, by the way. You also have the option to merge the two LLCs. That means the property, debts, and liabilities of your old LLC will fall under your new LLC.
Domesticating your LLC basically means transferring it from one state to another.
This is where it gets tricky, folks. Option #3 in which you domesticate your LLC is often combined with or discussed with Option #2. (As if legal stuff isn’t complicated enough already.) You’ll find information about dissolving your old LLC and starting a new one ifdomesticatingisn’t an option in your new state. Dissolving is also part of the process of domestication.
Pros: Why domesticate your LLC? Just as you would with Option #1, domestication lets you keep your identifying information, tax info, credit rating, and biz relationships. You also won’t have to meet the LLC requirements of two different states.
Cons: Unfortunately, not all states let companies domesticate. That’s where Option #2 comes into play.
Phew! How was that rundown for how to move your LLC to another state? To recap, you can:
What’s the best option for you? It depends on where you’ve moved to and what state you’re leaving behind. All states have varying income tax rates. Some states may have business or tax benefits while others don’t. Do your research and weigh each option carefully before you jump in with both feet.
And of course, if you somehow forgot to create an LLC operating agreement, The Contract Shop® has you covered. Our LLC Operating Agreement Contract Template outlines everything you need to know for situations like this, plus others like selling your company or leaving it to your partners.
Grab your template now from our shop!
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