With economic certainty, business owners often have to face the problem of closing down their shop or moving it into a different state where operations could fare better. Moving a small business is a complicated process; not only do you have to consider making legal changes, but you also have to think about relocating your employees and your family. The success of this venture depends on how ready you are for taking on the following challenges:
Making Legal Changes
One of the first things you need to understand is that your legal status will change once you decide to move your business to another state. In general, businesses must be duly registered with one or more states. For example, a limited liability company (LLC) must submit the Articles of Organization with a state.
If you have a sole proprietorship, there is no need to think about state registrations, as the business is not registered with the state to begin with. However, you do need to inform the IRS of the move.
Partnerships and Corporations
Since partnerships and corporations have multiple owners, you have to consider their interests as well. It is a much more complicated process that may need the help of a corporate lawyer.
Limited Liability Company
If you decide to move an LLC to a different state, you have the following options:
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- Continue the LLC in the old state and set it up as a foreign LLC in the new state
- Close down the old LLC in the old state, and set up a new one in your current state
- Form a new LLC in the current state and merge it with the old LLC
Multiple-member LLCs may also choose to register a new LLC in the state. Then, have the members transfer their ownership from the previous LLC to the new one.
Legal Documentation for the State Move
Moving to a new state means preparing separate legal documents, as each state has its own requirements. In general, the documents that need to be updated are:
Note the different requirements that each state has for Articles of Incorporation, Articles of Organization, and partnership registration documents. You need to prepare and submit them to the current state you plan to move to.
Similarly, you also need to update all the governing documents, including the operating agreement, by-laws, and partnership agreement. If you have these existing documents, all information must be updated to meet the requirements as mandated by the new state.
Changing the Business Location
When you move your business, you also have to address the business location. You can opt to continue “doing business” in the old state and have a tax presence in the new state. If you plan to do this, you may choose to have a domestic LLC in the former state and have a foreign LLC in the new state. In this case, you may need to retain your employer ID number.
Once you decide on your business location and have finalized your legal documents, it is time to move your office to your new address. The keys to a long distance move depend on whether you have a partner that you can rely on to carry out these complicated tasks.
During the move, don’t forget to keep track of expenses. Consider what may be deductible on your business tax return. Discuss tax planning with your lawyers. Being keen on your costs can help you manage your business better.