Digital nomad born in New York but currently living online, Eva knows everything there is to know about packing and moving.
Moving a Business to Another State – Things to Know
Moving a business to another state is a huge step that requires careful planning. It might be a good idea to hire reliable professional movers, especially if you are relocating long-distance. Specialized companies would know all the regulations which need to be followed when relocating. Before making this decision, you also need to consider the impact on your profit.
Relocating your office might be good for the business
Important Steps for Moving a Business
There are several steps you can make when relocating your business or LLC to another state, regardless of what are your reasons to move. You can file your enterprise as a foreign company and keep the existing one. Another option is to form a separate enterprise, acquiring all the assets and liabilities of the old one and then close the one originally formed. Or follow one of the best long-distance relocation tips for entrepreneurs – merge the old one with the one you will form.
Legal Conditions to Leave
When it comes to moving small businesses, entrepreneurs have the easiest time in terms of process. The sole thing they have to do is register a company or LLC in another state, the same way they did the first time.
A corporation that wishes to move states, on the other hand, has it a bit more complicated because there are a lot of things to consider when relocating to a new state. The same goes for those considering where to move from Los Angeles and settle on the East Coast or those who want to live in Boston so they want to transfer their enterprise there. A corporation can opt between registering as an alien entity in the other state, closing the shop in the previous location before opening it again in the other location, or merging the two. Just to be clear, none of the three is simple, so let’s go into some detail about them.
When you register a company or LLC in any of the States, it will always be written down that it’s registered there. If you decide to move, be it for reasons of tax or you just want to explore different options, your business won’t magically relocate in the administration’s mountains of legal documents. There are a couple of ways to transfer your enterprise, so ensure you write it down on your relocating to another state checklist.
Filing a Foreign Entity
This option is the most favorable one. It means that your enterprise is filed as a foreign corporation but stays registered in the state where it was originally formed. So it will not be a different enterprise but rather a foreign company in another state. This is the cheapest and quickest way to set up a new enterprise.
Forming a New Enterprise in a Different State
Forming a distinct company is the most popular option for businessmen who do not want to consult an attorney. They just abandon the previous enterprise and start over. A fresh start may be good but this way you lose any credit your enterprise may have established previously. Also, there are procedures to follow if you want to close an enterprise legally and avoid penalties.
Merging the Old Company into a New Enterprise
This option helps you save the Federal Employer Identification Number FEIN of the old company. However, it costs more because you will have to form and register a new enterprise and dissolve the previous one, along with filing “Articles of Merger” which entails certain fees in the future state.
Moving an LLC Is Like Relocating a Corporation In Terms of Tax
Just like corporations, LLC (Limited Liability Companies) have similar options. They can continue their work in the previous state and register it abroad as a foreign enterprise, but they have to duplicate their annual report and/or franchise tax fees and face more complicated tax filing. Furthermore, they can liquidate the old LLC without any federal tax consequences and form a new one. Another possibility is merging the existing LLC into a new one, without any immediate tax consequences if members from the old state continue to own at least 50% interest in the LLC.
Moving a small firm or a corporation between the states takes time, but in doing so you’ll make it all legal and properly registered.
Expand Your Business
Expanding your business is usually what you have in mind when you move to another location. Even if you donate unwanted items and move into a smaller place first to reduce the costs of moving, the goal is to grow and prosper. To have a solid basis for such an evaluation, you need to conduct a thorough study of the potentials the place has to offer, both in the field of market demand and human resources. In the long term, your enterprise will have the ability to expand only if all the prerequisites are in place.
Worries Related to Moving Your Business to a New Location
Relocating a business or LLC is often instigated by the necessity to lower the costs or provide a better life for the owners and employees. However, there are a lot of obstacles to overcome, such as:
And finally, when you figured out the best time of the year to move as well as where you should move the company, you get to organize the relocation process, which is not an easy task, especially if you are not very familiar with the future environment.
The decision to register a firm in other states doesn’t only concern you. As an entrepreneur, you may be the sole responsible person and the only one involved, but with limited liability or a corp, it’s not so. There are investors and shareholders, and they all have a stake in the future, so be sure that doing the relocation serves their interests too.
Get everything you need and avoid having any problems.
Closing the original company and forming a new one also brings fees and potential tax increases, and the same applies to mergers. Taxes can also have a huge impact on your profit, so you need to get to know the tax situation in the future location and find out which locations offer certain credits.
What Should You Expect in the Future – Customers and Growth Capabilities
Obviously, your relocation adventure will impact your customers, too, especially if you are relocating farther away (for instance – from New York to one of the suburbs of Chicago). In that respect, you need to consider who your biggest clients are and evaluate the risks accordingly. Maybe it is not worth it to plan your moving budget and move if you risk losing your clients.
Furthermore, you will obviously want to expand your business. But in the long term, it depends on the available resources at your future location, so make sure to conduct a study of long-term development options, both in the field of market demand and labor pool available.
Whether the profit is the sole reason for your decision to relocate your small business or LLC out of state or you’re doing it for any other reason, make sure that the process is conducted properly. The best option is to pay an attorney so that you can be sure that all the legal shenanigans are done and your business registered as it should be.