For various reasons, a small business owner may need to move their limited liability company (LLC) to a state other than where it was formed.
Entrepreneurs may do this for many reasons:
- Cross-border business expansion
- The owner’s relocation
- Estate planning
- More favorable taxation or state laws
To transfer your LLC to another state, you’ll either have to register a “foreign” LLC in the new destination or entirely transfer your business entity’s legal “situs” to the new state.
Below we discuss the four primary techniques a business owner can use to accomplish the company move.
Table of contents
- How to move your LLC to a new state: 4 solutions
- LLC domestication/conversion
- Register as a foreign LLC
- Register a new LLC and merge the old one
- Dissolve your old LLC and register a new one
- FAQs about transferring an LLC to another state
How to move your LLC to a new state: 4 solutions
Each state has its laws concerning business entity formation, operation, and dissolution.
Most follow the same principles. But the procedures may vary. Overall, a business owner can move their LLC using one of these methods:
- Apply for domestication in your new state (and fully move an old LLC)
- Register as a foreign LLC in the new state (and maintain the legal formation of the LLC in the original state)
- Register a new LLC and merge the old one (if domestication is not available and you don’t want to maintain two companies)
- Dissolve your old LLC and register a new one (the most expensive and time-consuming option. It makes sense if the merger isn’t available/possible)
Each option has different costs and consequences. Each accomplishes something different. We will discuss all of them.
“Domestication” or “Conversion,” as some states refer to it, is the legal process by which a business owner may change the state laws that apply to the LLC from the state where the LLC was originally formed to a new state.
For example, a business owner may have initially formed an LLC in Idaho (subject to Idaho law and Idaho LLC reporting requirements). But, for various reasons, now desires to move his LLC to Florida and be subject to Florida LLC laws and Florida reporting requirements.
If the owner properly follows the procedure set forth by both Idaho and Florida, domestication can accomplish this goal.
What states allow LLC domestication?
To accomplish an LLC domestication, the owner must move the LLC from and to a state that allows domesticated LLCs (or conversion).
Below is a list of states that allow LLC domestication:
- District of Columbia
- New Hampshire
- New Jersey
- South Carolina
- South Dakota
As of the date of this article, New York is not included in this list. Thus, a domestication strategy is not possible to or from New York. But this may change in the future.
Steps to domesticate an LLC
Moving an LLC using domestication has many advantages over the other three options discussed below.
The main advantages are the relative ease and low cost of the process and the ability to maintain business continuity.
An LLC doesn’t skip a beat in its operations using the domestication process. It maintains the same name, bank accounts, and employer identification number. The LLC also doesn’t have to amend any of its contracts as it’s legally the same entity that entered into those contracts. Further, for tax reporting purposes, nothing changes. The LLC is the same taxpayer as before the domestication.
Each state has its laws concerning the steps necessary to complete an LLC domestication. But the process is similar.
Below are the steps to complete domestication in Florida (called a “conversion”):
1. Prepare a Plan of Conversion which includes, at a minimum:
- The name of the out of state LLC;
- The name, jurisdiction of formation, and entity type of the new entity (the Florida LLC);
- The manner and basis of converting the interests in the out-of-state LLC to interests in the Florida LLC;
- The proposed articles of organization of the Florida LLC;
- The full text of the Florida LLC operating agreement which is proposed to be in a record, if any (note this is not filed with the Florida Division of Corporations. It’s a private document to be kept with the books and records of the LLC);
- Any other provision of Florida law or the articles of organization of the Florida entity; and
- All other statements must be outlined in a plan of conversion by the law of the old state from where the LLC is moving (for example, California).
2. Obtain approval from all the out-of-state LLC members unless the out-of-state LLC operating agreement provides approval by a lesser number of members. All of the members must consent to the change in writing.
3. File Articles of Conversion (in other states, this is called Articles of Domestication) with the Florida Division of Corporations ($25 fee) including, at a minimum:
- The name, jurisdiction of formation, and entity type of the out-of-state LLC;
- The name, jurisdiction of formation, and entity type of the Florida LLC (basically a statement that it will be a Florida LLC);
- The Florida LLC’s Articles of Organization (as an attachment);
- A statement that the conversion was approved by the out-of-state LLC as required by the law of the prior state and by each member of the out-of-state LLC required to approve the conversion;
- A statement that the Florida LLC has agreed to pay to the members of any limited liability company with appraisal rights the amount to which such members are entitled under Florida law; and
- The effective date of the conversion (if not the same as the date of the filing of the Articles of Conversion).
4. File Articles of Organization with the Florida Division of Corporations ($125 fee);
5. Comply with the Domestication/Conversion laws of the original state of formation
- For example, if the LLC were originally formed in California, it would have to file a California Certificate of Conversion with California’s Secretary of State ($30) pursuant to its LLC Act.
Register as a foreign LLC
An LLC formed in one state may do business in other states. When an LLC conducts business in a state other than the one it’s formed in, the LLC is considered a “foreign entity” in those states and must register to do business locally.
This strategy is used when an LLC wants to maintain contact with the state in which it was incorporated but also conduct business in a different state.
Can I live in a different state than my LLC?
Yes. You can live in a state different from where your LLC conducts business. This is often the case where a business either expands into another state or forms its LLC in a state with more favorable laws but doesn’t conduct business in the state of formation. This is often the case with Delaware LLCs.
Steps to register a foreign LLC
The steps to register your current LLC as a foreign LLC in another state are generally similar to forming a new LLC in another state. For example, below are the steps to register a foreign LLC in Florida:
- Obtain and File a Certificate of Existence (or Certificate of Good Standing) from the home state with Florida
- Ensure that the name of the LLC is unique and contains the proper designation (i.e., “LLC,” “L.L.C.,” “Limited Liability Company”)
- Appoint a registered agent for service
- File Application by Foreign Limited Liability Company for Authorization to Transact Business in Florida (fee of $125) along with a cover letter
- File annual report by May 1st each year ($138.75 annual fee)
This process doesn’t create a new legal entity or move the existing LLC to a new state. It’s merely a process by which an LLC from another state notifies a new state that it has or will conduct business there. It’s a flag to the new state, saying, expect me to pay taxes in your state.
The LLC will often have annual filings and fees (or minimum taxes) in both states.
What if an LLC has no income?
Again, a business will often form an LLC in a particular state even though it doesn’t conduct business in that state. In those cases, the LLC will still have to file annual reports and pay minimum fees or taxes to the state where the LLC was formed.
Register a new LLC and merge the old one
If you don’t want to keep your old LLC, states allow you to merge the old LLC into a new LLC formed in a different state.
Similar to the domestication/conversion process, a merger is a state process provided by law, and specific requirements must be met in both the “old” state and the “new” state.
There are important and complicated Federal and state tax considerations involved in merging two LLCs beyond this article’s scope. Before proceeding with a merger, you should consult your tax advisor.
When an LLC is registered to conduct business in multiple states, a merger may require it to comply with filing requirements in each state in which it’s registered. To ensure compliance with state requirements, you should consult the statute under which the LLC is organized and the statutes in those states in which it’s registered to transact business.
How to merge two LLCs
The first step in a merger is to form a new LLC in the state where you want to do business.
Next, the old LLC is merged into the new LLC. After the merger, the old LLC ceases to exist legally, and all assets and liabilities of the old LLC are transferred to the new LLC.
After registering a new LLC, here’s how to begin the merging process in Florida:
- Prepare a Plan of Merger. The content requirements are similar to those for a conversion/domestication)
- Obtain unanimous Approval of the Plan of Merger from the members of both the old LLC and the new LLC by a properly called meeting of the members (unless the operating agreement states otherwise as to the voting and meeting requirements)
- Make sure both LLCs are up to date on all state filings
- File Certificate of Merger with cover letter ($25 fee)
- Ensure that the Plan of Merger complies with the laws of the “old” state
Dissolve your old LLC and register a new one
Finally, if, for some reason, none of the above options work for you (or seem too complex), you can dissolve your old LLC per the law of the state where it was formed and then form a new LLC company in another state.
The dissolution of an LLC is a complicated process. It involves following the instructions set forth in the LLC operating agreement and state law for selling the LLC assets, debts, winding down its business, and distributing the remainder to the members.
The members then contribute the assets distributed by the old LLC to the new LLC. This process involves complicated Federal and state tax issues beyond the scope of this article. Please consult your tax advisor or business attorney if you contemplate using this method.
How to dissolve an LLC
To dissolve an LLC, first look at the operating agreement.
The operating agreement will usually provide detailed instructions to the LLC members on the process to be followed when the LLC is dissolved. If state law overrides the operating agreement, then follow state law.
In general, the steps involved in dissolving an LLC include the following steps:
- Follow the procedures outlined in the LLC operating agreement
- Notify all the creditors and close business accounts
- Notify the tax authorities and pay outstanding amounts
- Close business bank accounts
- Sell company assets and pay remaining liabilities
- Distribute remaining assets to members
- Notify other states where registered to do business
- File Articles of Dissolution with your home state
- You have four ways to transfer an LLC to another state.
- Foreign LLC registration works best if you want to keep your LLC in the state it was formed but has begun conducting business in a new state.
- Domestication/Conversion is a good option if you want to completely move your LLC to a new state. However, both the state you’re leaving and the state you’re going to must allow this process.
- LLC merger is an alternative strategy for completely moving your LLC to a new state when either you’re leaving or the state you’re going to doesn’t allow for domestication/conversion.
- LLC Dissolution is an alternative to the merger process but a more costly and complicated one.
- Each of the solutions has varying complicated Federal tax and state tax consequences. Before choosing a solution, consult your tax advisor.
- Also, each solution has a different effect on the continuity of the existing business. Foreign registration or domestication/conversion maintains the continuity of the existing business. Merger or dissolution disrupts the existing business continuity in several aspects, including requiring the new business to obtain a new tax id number.
- Mind the expenses. The varying costs in each case include a state filing fee, payment of a franchise tax in the new location, payment of a business license(s). Domestication is likely the least expensive solution, while dissolution is the most costly.
FAQs about transferring an LLC to another state
Here are some frequently asked questions regarding moving an LLC to another state.
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