Whether it is for the benefit of the business or for personal reasons, it is sometimes necessary for a company’s owners to move their organization to a new state. On top of operational and logistical considerations, moving a business also requires a substantial amount of formal paperwork. It is exceedingly important to prioritize the proper relocation of the formal business entity, ensuring that the business is operating in accordance with its new state’s laws, taxation requirements, and regulations.
There are several paths that ultimately lead to operating your business in a new state. Read ahead to understand your options.
Relocate a sole proprietorship or general partnership
Sole proprietorships and general partnerships face relatively simple formation procedures. As a result, their relocation processes are fairly simple and straightforward. In order to successfully relocate one of these informal business types, their owners typically will only be required to file a “doing business as” (DBA) in their new state.
Relocate a corporation
If your business is a corporation, filed as either a C corp or S corp, you have three relocation methods to choose from:
Dissolve your business and start a new corporation
If you choose to dissolve your old company and start a new one in your preferred state, you first need to go through the official dissolution process for your original company. Once this is completed, you will need to file for incorporation in the state of your new location. This does mean that you will pay the costs associated with dissolution and re-incorporation. C corps may also face additional taxation during the asset liquidation process.
Relocate via foreign qualification
Instead of being forced to dissolve your old corporation, you may choose to instead apply for foreign qualification in state that you wish to operate in. By doing this, your corporation will remain unchanged, still existing in the original state. However, it will also be authorized to conduct business in the new state as well. You will be required to pay fees in both states, and also adhere to certain formalities in every state that you are authorized to conduct business in. If you originally formed your corporation in a state you do not reside in, you can simply stop operations at your pre-existing location, and qualify in your desired state.
Reorganize your existing company
It is also possible for relocating corporations to start a new corporation in their new desired state of operation, and then go through a process called “reorganization” to merge to their new company with the old one. A merger such as this is tax free for C corps, however it is not always the best option for some types of businesses, as it still does not help solve the problem of liquidating the old company’s physical assets. After the reorganization process, the old company will cease to exist.
Relocate an LLC
Your options for moving an LLC to a new state are nearly identical to the requirements for relocating a corporation. There are, however, a few unique factors when relocating an LLC. Liquidating and forming a new LLC carries no taxes at the business level, due to the fact that this business structure qualifies for “pass through” taxation. Also, the reorganization process for LLCs is instead referred to as “continuation”.
Swyft can help!
Is your business relocating? Don’t be overwhelmed! The experienced professionals at Swyft can help guide you through this process. Contact us today!