By The Wyoming LLC Attorney TeamSep 29, 2021
This article discusses various methods for transferring a limited liability company or corporation from one state to another. It covers options such as updating the business address, registering as a foreign entity, continuance of domestication, and starting a new company. These strategies can help businesses change locations, reduce taxes, and manage fees while maintaining their original formation date and existing contracts.
The only constant is change and sometimes the founders of companies have a need to change the location of their company. Many people do not know this, but it is possible for a company (limited liability company or corporation) to change its state. Depending on your needs there are many different ways to accomplish the goal of changing the location of your company. This article will describe the many ways you change the location of your company.
One of the easiest ways to change the location of your business is to update the “Principal Address” or “Mailing Address” as listed with the secretary of state. Just because your company was formed in a state does not mean that it needs to maintain its principal address or mailing address there. The address of the business can even be in a different state. You do need to be aware that you cannot sever all of the company’s ties to the state in which it was formed because you must maintain a Registered Agent address in the state in which the company was formed. For more about Registered Agents, read this page.
You can change the Principal Address or Mailing Address of your company by filing the appropriate form with the secretary of state of the state in which your company was formed. Keep in mind that if your company will actually operate in a different state, then it will likely need to register as a “Foreign Entity” in that state. The laws of each state vary as to what constitutes “operating” in the state, but generally, solely maintaining a business or mailing address, without more, will not require foreign entity registration.
Sometimes a company does not need to move as much as it needs to open up a new location. This is great news for your business because it means you are expanding. If a company is “conducting business activities” in a state other than its state of formation, it will need to register as a “Foreign Entity” in the second state while maintaining its Registered Agent and good standing in the state in which it was originally formed. Sometimes it can be challenging to understand if your company needs to register as a Foreign Entity because the LLC laws of most states do not list the business activities that DO “constitute doing business” but instead list the activities that definitely DO NOT “constitute doing business” in the state.
To better understand when your company will need to register as a Foreign Entity, it is helpful to understand the legal reasoning behind these registration laws. States want to protect the citizens of the state from harm and if the citizens of a state are harmed, the state wants to make it easy for its citizens to sue the company that caused the harm. Foreign Entity registration makes it easy for a citizen to sue a company because the company will be required to maintain a Registered Agent in the state that will accept service of process documents, otherwise known as lawsuits. Without a Foreign Entity registration requirement, a company could only be sued by traveling to the state in which it was formed and delivering the lawsuit to the Registered Agent there.
With this information in mind, the general rule for Foreign Entity registration is if your company is interacting with the public in a particular state or has employees in a particular state, it should register as a foreign entity in that state. Foreign Entity registration can be accomplished by securing the services of a Registered Agent in the new state and filing the appropriate forms with the secretary of state.
Sometimes a company is not just changing its address or opening up a new location, but the business is severing all ties with its original state of formation and moving to a new state. There are many reasons a company may want to do this. Some of the most common reasons are taxes and fees. State income taxes vary greatly, varying from 0% in Wyoming, Florida, Texas, Washington, Nevada, and South Dakota to more than 10% in California, and New Jersey. While calculating taxes is very complicated, they generally are based on the source of the income or the location of the recipient of the income.
If you are a resident of California, providing services to citizens of California when you start your company, you would likely form your company in California and be subject to California taxes because the source of your income is California and you are located in California. But suppose you decide to move your home to Wyoming and provide online-only services from Wyoming to citizens of all 50 states. If your company stayed in California, your income would be subject to California taxes even though you are no longer in California. In this situation, you would benefit from moving your company from California to Wyoming.
Another common reason for companies to move to a different state is because they want to reduce the annual fees they pay to the state. The annual renewal fees charged by each state vary greatly. For example, some states calculate the annual fee based on the income of the company. This is often called a franchise tax and can lead to hundreds or even thousands of dollars in annual fees in one state and almost no fees in another state. If your company is paying more than a couple of hundred dollars in annual fees to the state, consider moving the company to another state to save.
One of the best parts of a continuance or domestication is that you will keep your original formation date, keep your same EIN number, and be able to keep your bank accounts and existing business contracts in place. (You should, however, update the IRS and everyone else of the change)
Moving a company is accomplished by filing for a Continuance or Domestication form with the secretary of state of the new state. The steps vary from state to state so you should enlist the help of a company with experience in this area, but generally include the following steps:
Sometimes it makes more sense to start over instead of moving the company. It’s ok to admit that things are not working out with a business. For example, if the original partners of the business decided to break up but each partner is going to receive some of the assets of the company, one of the partners may decide to take the assets they received and start a new company with them.
This would involve a two-step process in which the old company is dissolved and the new one is formed. These are two separate actions with the only connection being the assets that are distributed from one company formed in one state and then contributed to another company in another state. These transactions can be complicated and you should seek legal advice before embarking on this type of transaction.
The great news is that you have many options when it comes to transferring an LLC from one state to another. Each method has its pros and cons but you can accomplish all of them with our help. If you're interested in transferring an LLC to another state and need assistance, contact us through our online form or call +1 (307) 683-0983to consult with our experienced paralegal team.