Did you know transferring an LLC to another state is a great way to benefit from an extensive, diverse workforce? Targeting market changes and avoiding unfriendly rules and regulations are other common reasons for this action.
The transfer is ideal for entrepreneurs who want to move closer to business opportunities for growth. Others also advance because of their family.
Do you want to learn the requirements to transfer an LLC to another state? Join us as we discuss everything you should know about the process. Let’s get started.
Can I transfer an LLC to another state?
Moving an LLC to another jurisdiction is possible if you can’t handle businesses in multiple states. You can start a company in one locality and move to another, but it often involves legal jargon, applications, licenses, and forms.
Many state rules and regulations vary, so it’s best to walk the process with a tax professional to avoid pitfalls. You might need to update addresses and register with the local and state taxing authorities.
Why would an LLC move to another state?
A business owner might move to another state as the company evolves and grows. Common reasons include the following:
- If the target market changes, a limited liability company might move to explore better opportunities in a different state
- Transferring to another jurisdiction is advantageous if leasing, renting, and property taxes have risen in the current environment.
- If the state raises business fees or imposes additional payments, an LLC might change location to enjoy low rates and tax benefits.
- Unfriendly rules and regulations in the state might warrant a change of environment for many businesses
- An extensively diverse workforce is another reason an LLC can move to a different state.
- Most LLCs move to another state because it makes business owners’ lives easier. They move to get closer to business opportunities and access to their spouse, kids, and aging parents.
How to move your LLC to another state
Moving an LLC to another state is a simple process that can quickly become overwhelming for novices. Follow the below steps:
Register your LLC in a New State
Your first method involves registering your business as a foreign entity in a different state while keeping the old one. The process includes the following:
- Visit the secretary of state’s website for specific information about the foreign registry for an LLC. You’ll access the application forms on their platform, so fill them out.
- Pay the annual fee charge (amount vary by state)
- Register your firm with the new state’s tax agency and pay the applicable fees
The system requires business owners to continue paying applicable taxes in the formation state. These fees are necessary for some jurisdictions, even if you conduct operations from other locations.
Dissolve the old LLC and start a fresh one in a new state
Dissolving the old limited liability company and forming a new entity in a new state is another tested and trusted method. It means officially ending the old business and starting afresh.
While the procedures vary from state to state, your LLC structure is integral. Read the operating agreement and articles of organization of the old business to learn the rules for dissolution.
The rules typically require members to vote on a resolution to dissolve the company. Keep everyone on board and follow every procedural document requirement to avoid legal pitfalls.
When dissolving your old limited liability company, you must:
- Pay off all debts
- Close all business operations
- File for dissolution in your state
- Share remaining assets with the owners
After dissolving an LLC, members must pay income tax on marketable securities and cash received. Failure to remit the Internal Revenue Service payment could result in fines and penalties. Now you can set up your LLC in a preferred state.
Merge your old LLC into a New LLC
Merging it into a new entity is a perfect way to transfer your business into a different state. Limited liability company laws in most jurisdictions allow one company to join resources with another.
Walk the process with a legal professional and follow the rules of your desired state. Most requirements include the following:
- Develop a written agreement for the merger
- Get approval for the plan via votes from members of the limited liability company
- Complete the merger forms with the secretary of state in the jurisdiction where you formed the business.
This process effectively dissolves your LLC combining it with the new one. The old company ceases to exist, and its property, liabilities, and debts become the responsibility of the new LLC.
Merging two LLCs is tax-free for federal income tax purposes. That’s if the old company members own about 50% interest in the profits and capital of the new LLC.
Domesticate your LLC
Domestication is best for transferring an LLC to another state. It’s also known as a conversion that allows you to conduct business operations as you created it in another jurisdiction.
The required steps for domestication vary by state, but they typically include the following:
- Create a plan to domesticate your LLC
- Ensure members of the limited liability company approve your conversion plan
- Get a good standing certificate from the state where you created your business
- File the articles and certificate of domestication in the new jurisdiction.
- Discontinue operations of the limited liability company in the old state.
Although domestication is the easiest way to move a business, not every state allows it. You can transfer your LLC to Arizona, California, Colorado, Delaware, the District of Columbia, Florida, and Idaho.
Transfer your LLC to another state with ease
Moving an LLC to another state is possible, but following the regulations and due diligence are crucial to your success. Consider paying off all debts and close all business operations before initiating the process for a seamless transition.
Domestication is another easy way to move your business inter-state, not legal in every jurisdiction. Get necessary information from appropriate agencies in your locality. Consider working with a legal attorney every step of the way.
