For those of you with an established business, how do you handle taking a business on the road? Do you need to register a new business in your domicile state? Let’s talk about how to transfer an LLC to a new state.
Let’s say you already have an LLC in Colorado, your “old” home state. Now you move to Texas as a full-time nomad and Texas is your new home state or domicile. Since your LLC was organized in one state and has now moved to a new state, you’ll need to register the LLC to do business in your new domicile state. To avoid having to deal with a business in two or more states, I suggest you transfer the LLC.
Transfer an LLC
How do you do this?
It’s not rocket science. I promise!
There are several ways to handle this, so let’s go over each 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.
Domesticate Your LLC
Domesticating an LLC is the name for transferring an LLC from one state to another. Be aware this process might not be available in all states. If it’s not available, then this isn’t the process for you. If the states do allow it, then this is probably the best option for you set yourself up in your new home state.
The following states support domestication in one way or another. Please know there are exceptions and it’s important to confirm it’s possible before moving forward.
Why domesticate an LLC?
This allows you to keep your tax ID number (your EIN), all bank accounts and maintain your credit rating as an established business. Plus, when you domesticate you’ll only have one location to worry about and no extra hassles of filing paperwork in multiple states or maintaining registered agents in different states.
To register an LLC as a domesticated LLC in your new state, you need to obtain a certificate of good standing from your old state. File that paperwork along with articles of domestication with your new state. Once that process is complete, you can close the LLC in the previous state.
Form a new LLC and dissolve the old
If domestication isn’t possible, then you may have to form a new LLC in your new domicile and dissolve the old LLC. This can get tricky if there are multiple members as you want to maintain similar interests in the business. I highly recommend getting professional guidance for this process if there are multiple members. If you’re a sole member LLC, it may be easier.
With this option it might be necessary to get a new tax ID number and establish new business accounts. You could also lose any good credit the business had built over years in existence. It may be possible to notify the IRS of an address change to maintain the same EIN. Again, I highly recommend getting professional help with this to make sure it is done right. No one wants to start off wrong, right?
However, closing the old LLC and opening a new one is still less hassle than dealing with operating a foreign LLC in your new state. This means you’ll have two LLCs to keep up to date on filings and maintaining two registered agents. I talk about this in another post where I discuss which state is best to form an LLC.
Who wants double the paperwork if it’s not necessary?
Other Things to Consider
Keep in mind an LLC is not itself a business entity. Instead, it chooses to be taxed as a corporation, partnership or sole proprietorship. This is important to understand so you know which is the best option in your new state. Tax classification is important to understand because states have varying tax rates and rules. I recommend discussing this with your tax professional to know all the tax implications of your new state.
Don’t forget to understand if you need to register with state and local tax authorities. This could be for sales tax, withholding tax and/or unemployment tax. Also, you might need a new business license from your local authority. Lastly, don’t forget to update your address with all your business contacts.
You don’t want important business communication lost, do you?
Moving an LLC to a different state is often a simple process. However, before you take the plunge please consider all the options and get a professional’s advice on the consequences of moving states.
Do you need help moving your LLC? Be in touch!