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Moving States with Your LLC: Key Considerations and Options for Personal Relocations
Moving States with Your LLC: Key Considerations and Options for Personal Relocations

Options and Considerations for Moving States with Your Business. Plan ahead for a seamless transition.

Updated over a week ago

What you need to know

Moving to a new state is an exciting adventure, but it comes with a unique set of decisions when you own a Limited Liability Company (“LLC”). If you're planning a personal move and have an LLC, it's essential to understand the legal and financial implications of the relocation.

This guide will help you navigate the options available for managing your LLC during your move. Choosing the most suitable option for your circumstances will enable you to continue operating your business successfully in your new location.

Already made your selection? Click here for an overview of the process for each option.

Option 1: Foreign Registration

What is it?

Foreign registration allows an LLC to operate in both its original state and a new state. This process doesn't involve altering your LLC’s structure in the original state but requires registering it as a "foreign" entity in the new state. Please note that although the term includes the word "foreign," it does not have anything to do with conducting business in other countries.

With a foreign registration, your existing LLC remains intact, maintaining its history and records. In addition, you don't need to create a new operating agreement, obtain a new EIN or make a new S election, making the process of getting up and running in your new state relatively straightforward.

Is it right for me?

Foreign registrations can be a good option if you plan to continue operating in your current state as well as your new state. You can continue working with existing clients in your original state, pursue new clients in your original and new state, and deliver services as usual in both states.

You will, however, be required to pay fees, file tax returns, and maintain compliance with regulations in both states.

If you intend to cease operations in your original state entirely, a foreign registration allows you to preserve the possibility of resuming business in your original state at a later time.

How do I set it up?

Collective can help you with setting up your foreign registration depending on the state. For states we can't support, we can connect you with our registered agent partner to help facilitate the process.

Click here to learn more about what this process looks like as a Collective member.

Option 2: Redomestication

What is it?

Redomestication is the process by which an LLC changes its domestic jurisdiction from one state to another, effectively relocating the business from its previous state to a new one. Through redomestication, your LLC preserves its historical records, S election, and EIN.

When you redomesticate your LLC, it's generally advisable to review and update your operating agreement to ensure it complies with the laws and regulations of the new state. While you may not necessarily need to create an entirely new operating agreement from scratch, modifications may be necessary to address any differences in state laws, regulations, or requirements.

Not all states allow redomestication, so it may not be an option depending on the states involved. Since redomestication can have substantial legal and tax ramifications, it's imperative to consult with professionals experienced in the laws of both your current and desired states. This ensures compliance and a smooth transition for your LLC.

Is it right for me?

Redomestication can be a good option if you plan to cease operating in your current state entirely. You will only be able to pursue new clients and deliver services in your new state. Additionally, you’ll only pay fees, file tax returns, and maintain compliance with regulations in your new state.

Redomestication is supported by several (but not all) states, and rules can vary significantly from state to state. For instance, California permits domestication only from states that also allow it, meaning states like Arkansas or New York, which lack provisions for domestication, cannot redomesticate to California.

The following states support redomestication for LLCs:

Alabama, Arizona, Arkansas, California*, Colorado, Connecticut, Delaware, District of Columbia, Florida, Idaho, Illinois, Indiana, Kansas, Louisiana, Maine, Massachusetts, Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, North Carolina, Ohio, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Wisconsin, Wyoming

*California will only domesticate businesses FROM states that have provisions for domestication.

It's important to note that while these states generally permit redomestication, there may be specific requirements and procedures that must be followed, and it's advisable to consult with legal professionals familiar with the laws of both the current and desired domiciliary states to ensure compliance and a smooth transition.

How do I set it up?

Due to the legal nuances of redomestication in each state, Collective does not currently support this process internally. We have a partner agency that can research to determine if redomestication between your old state and new state is possible, and prepare the forms for filing if so.

Click here to learn more about what this process looks like as a Collective member.

Option 3: Dissolution and Reformation

What is it?

Dissolution and reformation involve closing your LLC in the current state and forming a new one in your desired state. Dissolving your current LLC effectively winds down the operations of the LLC, settles its debts and obligations, and liquidates its assets, if applicable.

After dissolving the LLC in the current state, you will form a new LLC in the desired state. This involves filing articles of organization or similar formation documents with the Secretary of State or equivalent authority in the new state. You'll need to choose a new name for the LLC (if the previous name is not available or suitable in the new state), appoint a registered agent, and comply with any other requirements specific to the new state's LLC formation process.

The history and records from your current LLC do not transfer to your new LLC, which may impact relationships with clients, vendors, or financial institutions. In most cases, you will be able to maintain your existing EIN (provided there are no changes in ownership or structure that require a new EIN) and federal S Election.

Transitioning through dissolution and reformation involves tax implications, including filing business tax returns for both the dissolved and new LLCs.

Is it right for me?

Dissolution and reformation is only a viable option if you plan to cease operating in your current state entirely, but it is the most limiting of the three options. You will only be able to pursue new clients and deliver services in your new state, and you won’t have the option to resume business activities in your original state (like you would with a foreign registration) or maintain your history and records (like you would with redomestication).

With dissolution and reformation, you’ll only pay fees and maintain compliance with regulations in your new state.

If you elect to dissolve and reform, you will need to file two business tax returns for the year in which the transition took place (one for the dissolved LLC in your original state, and one for the reformed LLC in your new state). If Collective set up your original business, we can help prepare your final year return. Going forward, you’ll only file tax returns in your new state.

How do I set it up?

Collective does not support dissolutions today, but we can help form your new entity. We can connect you with our registered agent partner to help facilitate the dissolution process.

Click here to learn more about what this process looks like as a Collective member.

Next Steps

Relocating to a new state with your LLC can be a complex process, but understanding the options available and their implications can make the transition smoother. Whether you choose foreign registration, redomestication or dissolution and reformation, it's essential to plan ahead, keep us in the loop and ensure compliance with the new state's regulations.

Click here to see instructions and an overview of the process for each relocation option.

Reminder: To facilitate proper planning, inform us of any intended move to a new state at least two months in advance. Remember to keep an open line of communication with us to help you navigate the process and coordinate the necessary details, ensuring a seamless transition for your LLC.

Disclaimer: The information contained in this document is provided for informational purposes only and should not be construed as financial or tax advice. It is not intended to be a substitute for obtaining accounting or other financial advice from an appropriate financial adviser or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.

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