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:
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:
For a summary of each state's rules on registering a foreign LLC, see our 50-State Guide to Forming an LLC.
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 formed your LLC, 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 (discussed below). However, if you will continue to do business in the old state, or you will do business in the new state only temporarily, it might be worth it to maintain your LLC registrations in two states.
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 How to Dissolve an LLC in Your State: A 50 State Guide.
When you dissolve your old LLC, you must:
When members dissolve an LLC, the 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.
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:
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.
In some states, you have the option to domesticate your LLC, which is a streamlined process for transferring your business to a new state. Also known as a conversion, domestication allows you to treat your business as if it was formed in the new state.
The steps for domestication will vary depending on the state. However, you typically must do the following:
While domestication is typically the easiest process for moving a business, it is not available in every state. If it's not an option for your business, you'll have to follow one of the other options discussed above.