You are ready to move to another state but is your company? Moving your business can be tricky, hiring a lawyer can help.
Moving your LLC, to a new state, can be an exciting and stressful process. However, it’s essential to weigh your options and make the move properly to avoid any legal or financial issues along the way. Whether you’re relocating for personal reasons or expanding your business, this blog will help you navigate the process of moving your LLC with ease.
First, choose the new state that you want to move to. Research the state’s business laws and regulations, tax requirements, and any other necessary information. It’s important to consider how the move will impact your current operations, customers, vendors, and employees. You may also need to obtain new licenses, permits, and certifications for the new state.
Once you’ve decided on the new state, you should decide what is important to you when the move is complete. The biggest question, is do you care about maintaining the same FEIN, bank accounts, credit and/or other financial accounts? If so, then your option is Domestication (if available) or Merger. Domestication is the preferred option, because it is less expensive and faster, although not all states will support Domestication. Hiring a competent attorney can help you understand the state requirements. If you don’t care about the FEIN and can start over, then moving is even easier. You can simply “start over” or foreign file in your new home state. Each option has its pros and cons, advantages and disadvantages.
There are Four Ways to Move an LLC
Again, if the biggest issue is keeping your FEIN, then you need to choose Domestication or Merger. The IRS will not permit you to change entities without changing your FEIN, and only Domestication and Merger are considered “the same entity” once everything is said and done. Other options include Foreign LLC or Asset Purchase. After your decide which option is better for you you’ll need to update any legal documents with the respective states and contracts related to your LLC, including your operating agreement, lease agreements, vendor contracts, and employment agreements. Hiring a law firm to file the appropriate documents with the state will ensure that they comply with the laws of the new state, that they reflect the changes to your business, and that they protect your interests.
What is a Domestication?
Domestication is when your state moves from one state to another. This option is not always available in every state. It is important to consult with an experienced attorney who can guide you through determining if this option is available. The LLC remains the same, it is just “domesticated” in the new state. The company will maintain it’s FEIN, credit history, banking accounts and merchant accounts. Documents are filed with both states involved, becoming a domestic entity in the target state and letting the original state know the company has moved.
What is a Merger?
A merger creates a new LLC in the target state and a plan of merger and other state required merger documents are filed merging your existing LLC or LLC’s into the newly created entity. A merger permits you to keep your existing FEIN, bank accounts, merchant accounts etc. This option is best when you want to move two or more LLC’S into one and when domestication is not available. You can also use this method to convert from entity type to another.
What is an Asset Purchase?
Asset purchase means you form a new company in the target state, and sell all of your assets and liabilities to the new entity, and close / dissolve the old entity. The advantage of an asset purchase is the cost, and speed; it is fast and inexpensive. The disadvantage is that you are starting over in your new target state, which means a new FEIN, new bank accounts and new merchant accounts. Another disadvantage is your will have to renegotiate and re-sign any contracts that exist with the old company. This a is great option for new or small companies. Companies will little existing cashflow, credit, financial relationships or outstanding contracts. Conversely, it may not be a great option if your company has contracts it cannot easily terminate or otherwise doesn’t want to terminate. Seeking the advise of an attorney is recommended to determine if an Asset Purchase is best for your company.
What is a Foreign LLC?
Foreign LLC means keeping your existing LLC in the home state, and registering the LLC in the new state too. It is almost like your company has dual citizenship. It exists in both the original, as well as the target state or states. Much like an asset purchase the advantage is cost and speed. The disadvantage is the opposite of the advantage, because you are registered in more than one state, the company is responsible for ongoing taxes and annual reports in each state. This will increase costs and additional business maintenance to stay on top of each state’s filing requirements.
Once your move is complete you will want to inform all necessary parties about your move, including customers, vendors, employees, and government agencies. You should provide ample notice and as much information as possible to minimize disruptions to your business. You may also need to change your business address, phone number, and website to reflect your new location. Additionally, you’ll need to register for taxes and obtain any necessary permits in your new state. This may include state taxes, sales taxes, and employment taxes. You should also obtain any necessary permits and licenses for your specific industry.
Moving your LLC can be a complex and time-consuming process, but it’s essential to do it right to ensure your business’s success. No two business moves are alike because the rules can be different from state to state. Due to the complex nature of moving your company it is recommended to enlist a team of professionals to ensure the task is completed accurately. Working with an experienced attorney, you can navigate the process of moving your LLC with ease and avoid any legal or financial issues along the way. The process can be tricky and there are a lot of moving parts, L4SB is here to help, contact us to ensure a smooth and successful transition for your business.