Are you moving to a new state and wondering how to re-establish your business there? Wondering how to make a seamless transition for your sole proprietorship, LLC or corporation in a new location? Here’s some essential information about relocating your business.
Sole Proprietorships
It’s pretty straightforward to move a sole proprietorship (or partnership) to a new state. You’re required to register your new business using the “Doing Business As” (DBA) registration process in your new state at which point you’ll discontinue your old one. Depending on the location of your business, you’ll either register at your county clerk’s office or with the state government. You can read more about DBA names here.
Limited Liability Companies (LLCs)
There are a few choices to consider when you move your LLC to a new state, so it’s wise to consult an attorney for expert guidance on the particulars of your business situation. Here are your options:
- Continue your LLC in the previous state. Register as a foreign (out-of-state) LLC in your new state. This translates into more paperwork for you because you’ll need to file duplicate annual reports and it may complicate your taxes. Things get more complex if you’re reporting for a multi-member LLC.
- Dissolve your LLC in the previous state. Establish a new LLC in your new state. There aren’t any tax consequences if you take this route.
- Register a new LLC in your new state. Each member transfers membership interest. When you register a new LLC, have each member transfer his or her percent ownership from the previous LLC to the new one.
- Register a new LLC in your new state. Merge your previous LLC into your new LLC. You can continue with your existing EIN because the IRS views this as a continuation of the previous LLC. If all LLC members still have a 50-percent interest in the capital and profits of the new LLC, you won’t face any tax consequences.
Corporations
Moving a corporation to a new state mirrors the process for an LLC. As always, it’s best to talk to an attorney about any tax consequences, reporting requirements and any specific requirements in your previous state about dissolving a corporation. Here’s what you can consider when relocating your corporation:
- Continue your corporation in the previous state. Register as a foreign corporation in your new state. Again, this translates into increased paperwork and the chance that you’ll incur fees in both states.
- Dissolve your corporation in the previous state. Establish a new corporation in your new state. Be aware that there may be costly tax consequences associated with this option and may have implications on employee benefits (such as retirement plans).
- Register a new corporation in your new state. Merge your previous corporation into your new one. This eliminates the need to pay fees in two states and allows for a tax-free reorganization.
After Your Move – Licenses, Permits and Taxes
Don’t forget your post-move steps for your small business, including applying for all the necessary licenses and permits (which vary by state). And keep in mind local zoning laws as they apply to your new location.
You’ll also want to be sure to take care of your tax obligations. Because you’re moving out of state, you’ll need to close out your tax year in your old state (often as simple as checking the “Final Return” box on your state return). Every business is unique, so talk to a tax expert for an understanding of your business tax responsibilities in the first year of your move. You can also deduct or capitalize the costs incurred during business relocation (including moving costs, relocation site scouting trips, travel and meeting costs). Get more guidance on small business expenses and tax deductions here.
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