Can an LLC Transfer to Another State?
Can an LLC Transfer to Another State?
What do you do when your consulting business is operating as an LLC in North Carolina, but then your spouse has a job transfer to California? Or what if your limited liability company is based in Cincinnati, Ohio, but you find great office space just across the river in Kentucky?
When you have an LLC that was organized in one state and has now moved to another one, you must register your LLC to do business in the new state. To avoid the hassle of dealing with two states, you may also want to transfer the LLC from the old state to the new one.
The procedure you’ll follow depends on your business goals and the states you are moving out of and into. Here are the options and the reasons you might choose each.
1. Register to Do Business in Your New State
When you move an LLC to another state, your business is considered a “foreign LLC” in that state. It’s perfectly acceptable to have an LLC that is formed in one state and registered to do business as a foreign LLC in one or more other states. In fact, corporations commonly select Delaware as their corporate home even if they only do business in other states.
You can register a foreign business by submitting a form to the state agency responsible for business filings.
Simply registering your LLC as a business in your new state can work well if your move is temporary, if you anticipate changing states more than once, or if you think you will continue to do business in your old state. You’ll be able to keep the same employer identification number, bank accounts and permanent business address while still doing business in a new location.
But if your LLC is organized in one state and registered to do business in another, you will need to maintain a registered agent in each state and keep up with each state’s LLC filing and reporting requirements. You may also have to pay additional taxes. California, for example, imposes a franchise tax on every corporation or LLC that is registered to do business there.
2. Domesticate Your LLC
Your next option is to formally transfer an LLC from one state to another. This process is known as domestication. If your state allows it, a domesticated LLC may be the easiest and best way to handle an LLC move. You create a domesticated LLC by obtaining a certificate of good standing from the old state and filing it, along with articles of domestication, with the secretary of state or other agency in charge of business filings in your new state. You’ll then need to dissolve the LLC in the old state.
Not all states allow domestication, so you’ll need to make sure it is permitted by both the state you are moving out of and the state you are moving into.
Domesticating an LLC allows you to maintain your previous business relationships, including your bank accounts, tax ID number and credit rating. You’ll only be located in one state, so you won’t have to worry about meeting two states’ LLC requirements. And the process is simpler than dissolving the old LLC and forming a new one.
3. Form a New LLC and Dissolve the Old One
An alternative procedure involves forming an LLC in the new state and dissolving the LLC in the old state. There are a few different ways to accomplish this: the two LLCs may merge, the old LLC may be liquidated, or the members of the old LLC may contribute their membership interests to the new LLC. Because this process is more complicated than either of the other two options, it’s a good idea to seek assistance from an attorney.
Forming a new LLC can be inconvenient because you will have to get a new tax ID number and establish new business accounts. You may also lose the benefit of good credit that your business has built over the years.
However, forming a new LLC might be your best choice if your state does not allow domestication and you do not want to contend with operating an LLC that is formed in one state and registered to do business in another.
4. Other Things to Consider
An LLC can choose to be taxed as a corporation, partnership or sole proprietorship. The tax classification that was best for your LLC in your old state might not be as advantageous in your new state because different states have different personal and corporate income tax rates. An accountant can advise you on the tax consequences of your move. You can change your LLC’s tax status by filing Form 8832 with the Internal Revenue Service.
When you move an LLC to another state, you may need to register with state and local taxing authorities. You may also need new business licenses, and you should update your address with everyone you do business with.
Moving an LLC to a different state is often a simple process. Before you make the move, however, you should consider your options and get an accountant’s advice on the tax consequences of changing states.
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