Your business’s lifecycle may include knowing how to transfer your limited liability company (LLC) to another state when specific events arise. Depending upon where you plan on reforming, domesticating, or transferring your LLC, several options may be available to achieve your legal and financial objectives. Your chosen method usually depends on your company’s needs, current location, and projected location.
This article addresses issues for transferring your LLC to another state, including considerations, steps, options, challenges, and more. We wrote this post to help LLC member-owners learn more about the process in general.
When You May Need to Transfer Your LLC to Another State
Setting up an LLC means that you have taken the necessary steps to ensure that your company’s legal, tax, and financial components remain compliant, and you likely want to continue that momentum when relocating.
Whether rapidly expanding or facing a challenging situation, transferring your LLC to another state requires proper planning and legal knowledge. The first step starts with determining if moving your LLC to a new state makes sense for your legal situation.
There are several reasons why transferring an LLC to another state may happen, including:
- Tax savings
- Selling the LLC
- Relocating the LLC
- Temporary relocations
- LLC owner death/divorce
- LLC owners wanting to sell
- New LLC owner appointment
- Other valid reasons
Regardless of your reasoning, it is essential to consider all factors of the move and requirements of a successful LLC state transfer. Every Secretary of State’s Office operates differently, too. Always get legal advice from an experienced business law attorney in your state to ensure all goes as smoothly as possible while mitigating associated risks.
Three Things to Consider Before Transferring Your LLC to Another State
The decision to relocate your business to another state can have significant repercussions, even if only for financial and legal reasons, and should not be made lightly. When relocating a business, it is essential to consider all relevant factors and make the best decision for all parties involved.
Below, we have outlined three considerations to make when determining if transferring an LLC is sensible for your situation:
Consideration 1. Cost
This consideration is one of the most self-explanatory and complex due to hidden or extraneous costs associated with relocating a business to a different state. It is essential for those involved in the transfer decision to comprehensively assess any financial surprises that may arise, as these costs may vary by organization and state.
Consideration 2. Taxes
When transferring your LLC to another state, it is essential to evaluate the tax climate. Taxes may significantly impact your profitability. When considering the tax ramifications, view the credits some LLCs receive for having offices in various locations.
Consideration 3. Legal Framework
Some states are more business-friendly than others. They typically provide more flexible civil services, favorable taxes, fewer LLC filings, less bureaucracy, and other amenities. Consider how transferring your LLC to a new state will impact your operation. For example, Delaware is a popular LLC state due to its speedy alternative dispute resolution (ADR) process.
Five Options on How to Transfer Your LLC to Another State
Transferring your LLC to another state can be complex and involves many logistical steps. This section addresses options for transferring an LLC from one state to another while offering suggested measures to make this transition as smooth as possible.
Here are five options and the corresponding steps on how to transfer your LLC to another state:
Option 1. Keep Current LLC and Register It in the New State
Obtain a certificate of authority while maintaining your LLC in the current state. That way, you can still conduct business legally. However, you will still be headquartered in your old state, which may not be ideal in some situations, especially when you have no intention of conducting business there in the future.
Option 2. Form an LLC in the New State and Close the Old One
This option is most common due to simplicity, and it works like this: you start an LLC in your new state and then dissolve the old one. It is the most legally compartmentalized option and will require you to set up new employee identification numbers (EINs), bank accounts, and other LLC-related documentation. However, it is a “clean break” with limited or no continuity outside of internal operations.
Option 3. Domesticate the LLC from the Old State into the New One
You can domesticate your existing LLC into the new state’s economy, depending on where you are going. It allows you to maintain registration in your current state while existing under state laws in your new location. Typically, you must file a Certificate of Conversion or some variation when relocating or transferring.
Option 4. Merge the Current LLC with a Newly Formed One in Your New State
This option allows for continuity when needed. Your business does not skip a beat when it merges the old LLC with a new one. However, a merger is a bit more complex since you may need to address financial processes, reporting requirements, computer systems, internal policies, taxes, and other issues. Get legal advice before proceeding if you have questions about an LLC merger.
Option 5. Get Foreign Qualification
Foreign qualification is when you register your LLC to do business in the new state. This option preserves legal continuity and existence while accomplishing the goal of conducting business legally. However, you might also need to pay additional costs and taxes for this option.
Get Help When You Transfer Your LLC to Another State
There are several variables to consider when transferring an LLC from one state to another. However, if you determine that moving your LLC is right for you and your business, assess all the costs, taxes, and legal framework associated with the transfer. Doing so will help ensure you make a successful transition with minimal disruption to you and those involved.
Before taking any steps or filing in multiple states, consult an experienced attorney to understand the practical realities and legal complexities of transferring an LLC. No matter what course of action you decide to take, always follow the professional and resourceful legal advice of counsel in your state.
