The stress and excitement of moving to a new state can be overwhelming… especially as a business owner. Not only do you have to think personally about where you are going to live and where is the closest grocery store but you HAVE to figure out how to move your Limited Liability Company, aka “LLC”, to another state. While you may be in a whirlwind of figuring everything out, remember that you have successfully filed for an LLC before, and you can do it again.
You have three primary options to choose from when moving your business.
- First, you can dissolve the current LLC and create a new one in another state.
- Second, you can keep your current LLC and register it in a new state.
- Third, you can merge your current LLC with your new LLC.
1. Dissolve Your Current LLC and Create Another LLC In Your New State
Oftentimes when someone hears “dissolve your business” they are hesitant. You have worked hard to establish the success of your business, why would you dissolve it? Do not worry, dissolving is not nearly as scary as it sounds. Dissolving your LLC simply means that it is no longer a legal entity in your current state and you will not have to pay taxes, fees, or file annual records. When registering in your new state, it is possible to establish an LLC with the same name and members of your dissolved LLC while running your business in the same way as before. On the other hand, when you dissolve your LLC, your credit history will be wiped and your loans will no longer be valid to use in the new state. The primary benefit to this option is that you no longer have to pay fees for the LLC in the old state but you do have to accept that the original LLC will be dissolved. When you officially dissolve an LLC, you do have to ensure you go through the proper procedure including notifying your state and acquiring a dissolution notice, notifying any and all creditors, close all bank accounts, get a new EIN, notify all clients/customers of the change, cancel business registrations and licenses in that state, and more. Due to the intricate nature of dissolution, it's always best to work with a licensed attorney in your state to go through this process. Obviously, this is a decision to think carefully about, but if you are looking to permanently relocate this is a great option. Here is the official U.S. Small Business Administration's local assistance tool and State LLC and Dissolution Document Finder that will connect you with your current and new states’ resources for business questions!
2. Keep Your Current LLC In One State and Register It As A “Foreign Entity” In The New State
At first glance you will probably think this is the best option, however it is the most expensive choice out of the three. This is better recognized as establishing a “Foreign LLC” which means the LLC is being transferred to the new state but did not originate there. The complications in doing this is that you have to run companies in both states. This includes paying for LLC taxes, fees, permits, and any other annual fees in BOTH states. Additionally, you need to follow business procedures in both states and should be regularly conducting business in both states to maintain this type of foreign entity registration. This is a great option if you are temporarily moving and plan to return to the original state or planning to expand your business into multiple states. However, if you do not plan to expand or move back this is going to be very expensive. Here is a link to Nolo.com’s LLC fee per state breakdown chart.
Another option is to file a “Domestication LLC Request”. This means that you permanently transfer your LLC from your current state to the new state. This is the ideal option for most businesses owners, however only 27 states allow for this to happen. Additionally, your current state and new state must allow for domestication transfers. If you are moving from a state that does not allow it to one that does or vice versa, you will not be able to use a domestication transfer. Here is a list of the current states that allow for LLC domestication.
3. Merge Your Current LLC With Your New LLC
This is probably the most complex option. You will very likely need legal counsel to complete this process and it can take a bit of time to have it approved. The first step here is to establish an LLC in your new state while maintaining the LLC in the current state. You will then need to have a merger contract made, all shareholders of the company to sign the agreement, and liquidate all of the assets of the current LLC to the new LLC. This will allow you to maintain your current credit history and will transfer all financial or legal obligations to the new LLC. You will need to pay both states’ required fees for the LLCs until the old LLC is completely dissolved. This cannot happen until you submit your application of the merger to state officials and they approve the request. The primary difference and potential benefit to this over a complete dissolution of your old LLC is that you can maintain your credit history and not have to completely start over, however it is more costly. You may also have issues related to your federal EIN number when you merge LLCs and may need to acquire a totally new one (see here). If you need more help, here is a link to the Small Business Administration's website for more information on business mergers.
Any of these options will help you successfully transfer your business while staying legally legit! There is not a “best option” when deciding which avenue you should take for transferring your business. You will need to decide where you want your business to go and if you plan to permanently move somewhere else. Either way, you know how to start an LLC and run a successful business (you are already doing that!), now you just need to continue that work in a new place. If you need more help, I would recommend seeking legal advice as this can be a tricky process.
THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. EVERY SITUATION IS DIFFERENT & IS FACT-SPECIFIC. A proper legal analysis is necessary based on your location and contract. Consult an attorney in your home state for advice regarding your contract or specific legal situation.