When moving to a different state, the process involved in moving your business along with you can be stressful if not completely confusing. There are many reasons to not merely shut down the existing company and start a new one. You typically have two options, or possibly three options, depending on the state your company is organized in and the state you are moving to. You could keep your existing company and register it in the new state, form a new entity and close your existing entity, or transfer your entity to the new state (although not all states allow this).
The quickest and possibly easiest option is to keep your existing company and register it in the new state. This is done by filing an application for foreign authority, whereby your new state recognizes your entity and that it will operate in your new state. Although this may be the easiest initially to do, it has some additional fees and can be more difficult down the line. When you file an application for foreign authority, you will need a registered agent in your new state, and you will also have to maintain one in your original state as well. You would most likely have to pay a registered agent service to act as your agent in each state (although you may be able to act as your registered agent in the state you have a physical presence in). Additionally, by maintaining an entity in two states, you have to follow all the rules and regulations of both states. Some states have periodic fees that have to be paid, as well as state tax filings. Even though you are not physically operating in that state, you may still have some requirements that you need to be aware of because failing to abide by the original state’s laws could result in the termination of your entity. But, operating this way does allow you to keep your employer identification number, your bank accounts, and any other contracts that the entity may have.
Another option is to form a new entity and close your existing entity. This can be a tricky option, as it requires forming a new entity in the new state, and then transferring all the assets to the new entity. Once that is completed, the original entity needs to be formally dissolved. As part of this process, you would need a new employer identification number, new bank accounts, and transfer any contracts or titles to the new entity. That last point can be the trickiest, because you need to make sure that any contracts the original entity had can be, and are, transferred to the new entity, and any assets are transferred to the new entity. Any items that are titled, like automobiles, would need to be re-titled with the proper authorities. For this option especially, tax consequences need to be looked and considered as there could be some negative tax consequences if done improperly.
The third option is to domesticate your entity. This is an interesting option, but not always available. To domesticate an entity, you would file articles of domestication with the new state, and then dissolve the original entity. However, only certain states allow for domestication, and some, if not all, of these states also require that the state the entity is originating from also allows domestication. But, if domestication is possible and you domesticate your entity, you get to keep your employer identification number, bank accounts, contracts, etc.
There are many considerations when looking at moving your entity, so speaking with an attorney early in the process will help you determine the best route. Choosing the best option will make life easier, and potentially save a lot of time and effort in the long run.
Ready to speak with an Attorney? Contact us or give us a call at 505.848.8581