When you move from one house to another, you likely have a checklist of things you need to take care of in the process…changing your mailing address, calling your cable TV provider, contacting your internet company. But when moving your business to another state, many business owners don’t know where to begin.
There are many reasons to consider moving your business to another state. For example:
- Your target market has changed—economically and/or demographically.
- The cost of real estate (including property taxes) has risen so much your business is at risk of going under.
- The state has become less business-friendly, imposing higher business taxes and more regulations. Other states may have tax incentives in place that would benefit your business.
- Family reasons, such as access to schools, spousal job opportunities, moving closer to extended family.
- Access to a different workforce.
Whatever the reason, the steps to move a business to a new state depend on the legal structure of your business.
Sole Proprietorship and Partnerships
As easy as you found it to start your business as a sole proprietorship or partnership, moving your business to another state should be just as simple—as long as you wrap up the old business in an organized way.
Here are some important things to remember when moving your sole proprietorship or partnership to another state:
- Although sole proprietorships and partnerships do not need to register with the state, you will need to cancel your local business licenses and permits and apply for new ones in your new location.
- Be sure to pay any outstanding fees, sales, and employment taxes.
- If your sole proprietorship or partnership has an assumed name or a “doing business as” (DBA), you will need to withdraw the name from your Secretary of State’s office and apply for the DBA in your new state.
- If your business bank is not nationwide, you’ll need to close your account and reopen another account.
- You need to inform the IRS of the business move so the Federal Tax ID number or federal employer identification number (EIN) has the correct business addresses on file.
- If you move mid-year, you’ll need to submit tax returns for both states your business was located in for that year because you’ll owe state taxes to both.
Corporations and LLCs
To operate legally in any state, corporations and LLCs must register with the state. Once you decide to move your corporation or LLC to a new state you have two options:
- Dissolve the corporation in the old state and start it anew in the new state; or
- File a foreign qualification in the second state.
Which approach is the right one for you depends on whether your move is permanent and whether you might operate your business in both the existing and the new state.
Permanent Business Moves
To permanently move a corporation or LLC to a new state, you must close the business in the original state and then register a new corporation or LLC in the new state. Specific requirements vary from state-to-state, but the typical steps of how to do it include:
- Agree to close the business and move the business. As a corporation or LLC, all board members must agree to the closure and move, and the agreement should be recorded in the meeting minutes.
- Next, you must file a “Certificate of Termination” or “Articles of Dissolution” document with the business’s current Secretary of State there. Filing Articles of Dissolution will allow you to end your business entity permanently. Before a state dissolves a company, the business must file all outstanding state fees, reports, and taxes.
- Because you are dissolving the existing corporation or LLC you must also pay off debts belonging to the business and also distribute any remaining assets to the members/owners. LLC’s choosing to file taxes as a partnership (pass-through) will not have to pay and business taxes on the assets, but members will have to pay income tax on the distributed assets.
- The rules for dissolution vary from state to state so make sure you check with your Secretary of State’s office for the correct procedure. CorpNet is ready to help guide you through the process of closing a business.
Once the business has been closed in the old state, your corporation or LLC can re-register in the new state following the new state’s rules for business name registration, filing articles of incorporation, and securing any business licenses and permits required.
Temporary Business Moves
If you expect your move will be temporary or you’ll still want to conduct business in your old state, closing your business in your old state and starting a new one elsewhere wouldn’t make much sense. In either of those scenarios, you should keep your corporation or LLC registered in the original state and then file a foreign qualification in your new state. Businesses that expand into new states must also file for foreign qualification.
Most states have similar procedures to file a foreign qualification:
- You’ll need to submit a Certificate of Authority (or Statement and Designation) application form and pay the fees to the Secretary of State office.
- You may be asked to show the original business is in good standing in its home state.
- Expect to provide details about your company, such as the name of your corporation, list of corporate officers, your domestic state, stock information (e.g., number of shares authorized, etc.), the principle location or address you’ll be using in your new state, and your registered agent.
A registered agent is a person or company with the authority to accept service of process (legal documents and government notices) on behalf of a business. If you plan on keeping your business standing in your original state, you’ll need to hire a registered agent to handle such things as official federal and state correspondence, tax notices, corporate filing requirements, and more.
CorpNet Can Help!
For all businesses, it’s important to carefully plan your business move and go over the plan with a professional so you aren’t missing any steps. Give customers and suppliers plenty of notice about the move and make accommodations to either maintain the vendor and client relationships or wind them up with no bad feelings on either side. Want some help with the move? Consider using CorpNet.com’s services to ensure you’ve filed everything correctly.
Call for a free business consultation: 888.449.2638