If you’ve formed an LLC for your business in one state, and later decide you'd rather have your LLC in a different state, what should you do? You have several options.
Keep Old LLC and Register In New State
Perhaps the easiest way to move your LLC to a new state is to keep your old LLC and register it as a foreign LLC in the new state where you want to relocate. This entails filing a form and paying an annual fee, which varies from state to state. For a summary of each state’s rules on registering a foreign LLC, see Nolo's article 50-State Guide to Forming an LLC. You’ll also have to register your LLC with your new state’s tax agency and pay any applicable state taxes.
Meanwhile, you’ll have to continue to pay the applicable taxes and fees for your LLC in the state in which it was organized. In some states, these can be quite expensive. For example, California imposes a minimum $800 annual franchise tax on all California LLCs, even if they do all or most of their business out of state. This can get expensive. Depending on what the annual fees and filing requirements are in the state where you were organized (and no longer want to stay), you may decide it's too costly and complicated to maintain two separate entities and choose one of the other alternatives you have for moving your LLC.
Dissolve Old LLC and Start New LLC In New State
Instead of keeping the old LLC, you can voluntarily dissolve it and form an entirely new LLC in the new state. Dissolution officially ends your old LLC’s legal existence. The rules and procedures for dissolving an LLC vary from state to state and also depend on how you have structured your LLC. The first thing you should do is read your old LLC’s articles of organization and operating agreement. One of these two documents will ordinarily contain rules on how to dissolve the company. Typically the rules will require that the LLC’s members vote on a resolution to dissolve. Make sure you follow any specific procedural requirements that may be part of your LLC's dissolution rules or your state's LLC laws. For details on your state’s LLC dissolution rules, refer to Nolo's articles How to Dissolve an LLC in Your State: A 50 State Guide.
When you dissolve your old LLC, you must wind up its business, pay off its debts, and distribute any remaining assets to its members (owners). Such assets may consist of cash, marketable securities, or real or personal property. When an LLC is dissolved, its members are required to pay income tax on the value of any cash or marketable securities they receive only to the extent the value exceeds their basis in their membership interests. Unlimited amounts of appreciated real or personal property can be distributed to the LLC’s members tax free. The LLC itself pays no taxes upon dissolution because it is a pass-through entity.
The members of the old LLC can then form a new LLC in the new state.
Merge Old LLC Into New LLC In New State
Instead of dissolving the old LLC, you can merge it into a new LLC. The LLC laws of most states permit one LLC to merge into another LLC. You’ll need to follow the procedures required by your state's LLC laws. These typically will require that you create a written plan of merger which must be approved by vote of the LLC's members. Articles of merger must then be filed with the secretary of state where the LLC was formed. Filing the articles of merger effectively dissolves the old LLC that merges into the surviving LLC. The old LLC ceases to exist and all of its property vests with the new LLC which becomes responsible for the old LLC's debts and liabilities.
For federal income tax purposes, a merger of two LLCs is tax free provided the old LLC’s members continue to own at least a 50% interest in the capital and profits of the new LLC in the new state.