Moving to a new state is an exciting adventure, but it's important to understand how moving states will affect your LLC. When you move, you'll have three options for your LLC: Foreign registration, redomestication, and dissolution and reformation.
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:
Alaska, Arizona, Arkansas, California*, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia**, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Hampshire, New Jersey, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Wisconsin, Wyoming
*California will only domesticate businesses from states that have provisions for domestication.
** Georgia only allows domestication out of the state (no domestications in)
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: Mergers
What is it?
A merger is the process of combining two LLCs into a single entity, with one LLC absorbing the other. In the context of relocating to a new state, this typically involves forming a new LLC in the desired state and merging your existing LLC into it. The surviving entity retains the business’s historical records, contracts, EIN, and financial history while operating under the laws of the new state.
Merging an LLC requires careful planning, as the surviving entity assumes all assets, liabilities, and obligations of the merged LLC. This means that any unresolved tax liabilities, compliance issues, or legal obligations from the original LLC will transfer to the new entity. Due to the complexity of mergers, it’s crucial to review your business structure, legal standing, and financial obligations before proceeding.
Each state has specific regulations governing mergers, including requirements for member approval, filing documentation, and potential tax consequences. Consulting legal and tax professionals familiar with both states' laws can help ensure compliance and a smooth transition.
Is it right for me?
A merger may be an option if you want to maintain your LLC’s historical records, EIN, and contracts while relocating to a new state. This approach can be beneficial if:
- Re-domestication is not available in the new state.
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You want to preserve existing business relationships, financial accounts, and tax elections.
You need to maintain business continuity while transitioning to a new jurisdiction.
However, mergers come with complexities, such as liability transfer, compliance requirements, and potential financial entanglements. The process may be more time-consuming and intricate compared to other relocation options like re-domestication or foreign registration. If your existing LLC has unresolved tax liabilities or structural challenges, dissolving and reforming the business may be a more straightforward alternative.
Additionally, not all states have the same merger regulations, and requirements can vary significantly. Some states impose additional restrictions or procedural steps, making it essential to research state-specific laws before pursuing a merger.
How do I set it up?
Due to the legal and regulatory complexities involved in mergers, Collective does not currently support this process internally. We have a partner agency that can assist in determining whether a merger is a viable option between your old and new state, as well as preparing the necessary documentation for filing. Click here to learn more about what this process looks like as a Collective member.
Option 4: Dissolution and Reformation
What is it?
Dissolution and reformation involves closing your LLC in its current state and establishing a new LLC in your desired state. This process formally winds down the original LLC’s operations, settles any outstanding debts or obligations, and liquidates assets (if applicable). Once the original LLC is dissolved, a new LLC is formed in the new state by filing articles of organization (or an equivalent formation document) with the Secretary of State or relevant governing authority.
As part of this process, you may need to choose a new name for your LLC (if the original name is unavailable or unsuitable in the new state), appoint a registered agent, and comply with any additional formation requirements specific to the new state.
Dissolution and reformation generally require obtaining a new EIN, as forming a new LLC is treated as the creation of a separate legal entity. A business’s EIN is a unique number specific to that business and cannot be transferred to a new entity.
Your original EIN will remain active and permanently assigned to your dissolved LLC, as the IRS does not cancel or reassign EINs. If you no longer need your EIN, the IRS can deactivate it, but it will always be associated with your dissolved business entity as its permanent federal taxpayer ID number.
After dissolving your LLC, you should formally close your business account with the IRS by sending a letter that includes:
- The legal name of your LLC
- Your EIN
- Your business address
- The reason for closing your account
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.
Still not sure?
Deciding to dissolve and reform your LLC is a significant choice, so it is completely understandable! We dive deeper into how to determine if dissolving and reforming your LLC is the right move by assessing key factors that will guide you towards an informed decision.
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.