If you have started a limited liability company (LLC) in one state and then later decide that you want to have your LLC in a different state, you typically have four (4) options:
Keep your old LLC and register a new LLC in a new state
Dissolve your old LLC and register a new LLC in a new state
Merge your old LLC into a new LLC in a new state
Domesticate your LLC
Keep your old LLC and register a new LLC in a new state
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. That way you can continue to do business in the old state. This entails (1) Filing a form; (2) Paying an annual fee (varies state to state); (3) Registering your LLC with your new state’s tax agency; (4) Paying any applicable state franchise tax fee .
Dissolve your old LLC and register a new LLC in a new state
This option terminates your old LLC’s legal existence. The first thing you should do is read your old LLC’s articles of organization and operating agreement since rules and procedures for dissolving an LLC vary from state to state and also depend on how you have structured your LLC. Usually, one of these two documents will contain rules on how to dissolve the company. Typically, the rules will require that the LLC's members vote on a resolution to dissolve.. When you dissolve your old LLC, you must:
Wind up its business
Pay off its debts
Distribute any remaining assets to its members (owners), and
File dissolution paperwork with the state
Pay Tax: 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.
Merge your old LLC into a new LLC in a new state
Instead of dissolving the old LLC, you can merge it into a new LLC. Most states permit one LLC to merge into another LLC. To merge, (1) Create a written plan of merger; (2) Have the plan approved by a vote of the LLC’s members; (3) File the articles of merger with the secretary of state where you formed the LLC.
A merger effectively dissolves the old LLC; and all of its property vests with the new LLC which assumes 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.
Domesticate your LLC
In some states, you can domesticate your LLC. Domestication,also known as a conversion, is a streamlined process for transferring your business to a new state. Essentially, domestication allows you to treat your business as if it was formed in the new state.
To domesticate your LLC, (1) Draft a plan for domestication; (2) Have the LLC members approve the plan for domestication; (3) Obtain a certificate of good standing from the state where you formed the LLC (if your state requires it); (4) File the certificate and articles of domestication in the new state; (5) Dissolve the LLC in the old state.
To then dissolve your LLC in the old state, you would follow the steps outlined above for dissolution.
This article was contributed by Hannah Noëlle Johnson, a Legal Intern at Spiller Law.
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The information provided in this article is for general informational purposes only and should not be construed as legal advice or opinion. Readers are advised to consult with their legal counsel for specific advice.