How to Transfer an LLC to Another State

Transferring a limited liability company (LLC) to another state can be a daunting task. Whether for tax benefits, strategic business growth, or personal reasons, understanding the options and factors involved can help to ensure a smooth transition.

This article will guide you through the process of how to transfer an LLC to another state. It covers key questions, like: Can my LLC operate in another state? And what are the main options? Let’s explore what to consider when planning to move an LLC to another state, and how to navigate state-specific regulations so you can make informed decisions and successfully transfer your business entity.

Options to transfer LLC to another state

When it comes to transferring your LLC business license to another state, there are four primary options to consider: domestication, foreign registration, merging LLCs, and dissolution and formation. You should understand their differences and benefits to determine the best option for your business.

1. LLC domestication: Seamless transition

Domestication is the process of transferring an LLC’s legal existence from one state to another. This option allows for a smooth transition, maintaining the LLC’s legal existence, bank accounts, tax ID number, credit rating, and existing business relationships. However, not all states permit domestication, so you’ll need to make sure both the origin and destination states allow this process.

To set up a domesticated LLC, follow these steps:

1. Secure a certificate of good standing from the state where the current LLC is registered.
2. Submit the certificate of good standing along with articles of domestication to the Secretary of State or other applicable state agency responsible for business filings in the new state.
3. Dissolve the old LLC in the former state.

Keep in mind that domestication may involve obtaining new business licenses, revising the operating agreement, and complying with applicable state tax laws, which can be time-consuming.

2. Foreign LLC registration: Operating in multiple states

Foreign qualification is the process of registering a business entity, such as an LLC, in a state other than where it was formed. This option allows the business to operate in multiple states without dissolving the existing LLC, preserving its legal existence and the continuity of business operations. Eligibility for foreign qualification must be verified, followed by submission of the relevant form to the corresponding state agency.

Although foreign LLC registration can be a more straightforward and cost-effective approach, it comes with its own set of challenges. The foreign LLC will remain subject to the regulations of the original state, potentially resulting in other compliance obligations. Moreover, as a foreign entity, it may not be eligible for certain benefits available to domestic LLCs in the new state. If you’re not sure about the legal requirements, consult with a business attorney.

3. Merging LLCs: A seamless transfer

Merging your old LLC into a new one in another state is another practical option. The process transfers any remaining assets and liabilities to the new LLC, simplifying operations and helping to maintain existing business relationships, contracts, and credit. You’ll also keep your existing tax ID, making things smoother with the IRS.

You should always check each state’s LLC laws, but the process generally involves three steps:

1. Draft a merger plan outlining the details, including the terms and how assets and liabilities will transfer.
2. Get approval from the LLC members, following the rules outlined in each operating agreement.
3. File the articles of merger in both states. Keep in mind that each state may have its own additional requirements and filing fees.

Once merged, the old LLC ceases to exist and remaining assets are transferred to the new LLC, which handles all business operations. You won’t need to formally dissolve the old entity—it automatically becomes part of the new LLC.

4. Dissolution and formation: Starting fresh

This option involves dissolving the existing LLC and starting a new one in the desired state. It’s an opportunity to start anew, but it can be more complex and may result in the loss of certain benefits or legal protections associated with the old LLC.

To dissolve an old LLC and form a new one, you must complete the appropriate dissolution paperwork in the original state and file articles of organization in the new state where you plan to transact business. Because you’re creating a completely new LLC and dissolving the old one, you’ll also need to communicate the change to creditors, customers, and stakeholders.

Key factors to consider when transferring an LLC

As the business owner, you don’t just need to know how to transfer an LLC to another state, you also need to take into account key factors like tax implications, legal requirements, and associated costs and fees when deciding what’s best for your business.

Tax implications

There may be tax implications when transferring an LLC to another state. For example, different states have different corporate income tax rates. The tax consequences will vary depending on factors such as the tax classification of the LLC, the tax laws of the old state and new state, and the method of transfer.

In the case of domestication, there may not be significant federal tax consequences. The new LLC can continue to use the same federal tax identification number and submit taxes just as before. No matter how you choose to transfer an LLC to another state, you should consult a tax specialist or business attorney to understand the tax implications for your situation.

Legal requirements

States’ legal requirements for transferring an LLC vary. To ensure you meet state-specific regulations and ongoing compliance obligations, research applicable LLC laws and consult with knowledgeable professionals. Failure to comply with state regulations may result in legal repercussions, such as fines, penalties, or rescission, which is when a contract becomes null and void, as well as the potential termination of the S corp election for tax purposes.

Costs and fees

The costs and fees for transferring an LLC can fluctuate. It’s important to research your desired option and plan a budget. Common costs may include filing fees, which can range from $35 to $800, and publication fees in certain states. There may also be costs associated with updating legal documents and contracts.

You should consult with a legal professional or accountant to obtain accurate and up-to-date information regarding the costs of transferring an LLC. Understanding the potential costs and fees can help you make an informed decision on the most cost-effective and efficient way to move an LLC to another state.

Navigating state-specific regulations

Each state has distinct rules and requirements for transferring an LLC. To successfully transfer an LLC to another state, you’ll want to research these regulations and follow the correct procedures.

Research state laws

Researching state laws helps you understand the specific requirements for how to transfer an LLC to another state. Make sure you learn about the laws of both the current and new states to reduce the possibility of any legal or financial complications.

You can source accurate and current information regarding state laws for LLC transfers from reliable sources such as LegalZoom. The Small Business Administration (SBA) also provides a helpful guide on choosing a business location. You can also review each state’s requirements and regulations, including business licenses and corporate income tax rates, on the official website of the state’s Secretary of State or Department of Revenue.

Consult with a professional

Consulting with a professional, such as a business attorney or accountant, can provide valuable guidance and support as you transfer your LLC to another state. These experts have a deep understanding of the legal and tax implications of transferring an LLC and can help you navigate the complexities involved.

Use these tips to find a reputable professional:

• Seek referrals from individuals who have previously used these types of professional services.
• Consult with professional tax organizations or business associations.
• Use online platforms that rate LLC service providers based on aspects like cost, reliability, and usability.

Before making a decision, conduct thorough research on the consultant’s previous business relationships and read reviews or testimonials to validate their professionalism and reputation.

Preparing your LLC for the move

Preparing your LLC for the move involves updating business information and appointing a registered agent in the new state.

Take these steps to help ensure a smooth transition of business operations:

Update business information

Updating business information is an important (and required) step in the transfer process. Here’s what you’ll need to do:

1. Inform the IRS and other pertinent agencies about the change in your permanent business address.
2. Obtain a new employer identification number (EIN) if necessary.
3. Identify the changes that need to be made to your other business information, such as if you are changing registered agents or structure.
4. Complete the required forms or documents to make the changes.
5. Notify the pertinent parties of the changes.
6. Update any pertinent documents or records.

You won’t need to acquire a new EIN if you’re transferring your LLC to another state, provided you’re keeping the LLC active rather than dissolving it. However, you will always need to inform all partners and relevant entities of your new business address to ensure proper correspondence and compliance.

Secure a new registered agent

Your registered agent will manage legal documents and correspondence for your new LLC. A registered agent is required for LLCs in all 50 states, and their responsibilities include:

• Receiving legal and official documents on behalf of the LLC
• Forwarding these documents to the appropriate individuals within the LLC
• Maintaining accurate and up-to-date records of the LLC’s legal documents and communications

Research the requirements for forming an LLC in the new state where you plan to conduct business, and then identify a registered agent who meets those requirements. This will help ensure that the state agency responsible for your LLC remains compliant with the new state’s regulations and receives all necessary correspondence in a timely manner.

You can be your own registered agent if you meet the requirements, but many business owners choose to use a registered agent service. This may be necessary if you don’t yet have a permanent address in the state where you are transferring your business to.

Frequently asked questions

What is the typical duration of an LLC transfer?

On average, a limited liability company (LLC) transfer can take up to 10 business days. However, the duration may differ based on the state in which the transfer is being conducted.

What potential business operational issues may arise when transferring an LLC?

When transferring an LLC, potential business operational issues to consider include changes to the LLC’s structure, ownership transfer, documentation, consistency with non-tax business purposes, and accounting and tax considerations.

Do I need to move my LLC if I move to another state?

You don’t always need to move your LLC if you relocate to another state. But if the new state becomes your primary business hub or offers better tax benefits, moving your LLC might be worth it.

Do I need a new EIN if I move my LLC to another state?

No, you will not need to acquire a new EIN if you’re transferring your LLC to another state, provided that you keep the LLC active rather than dissolving it.

What are the potential costs and fees associated with transferring an LLC?

The potential costs and fees associated with transferring an LLC can vary depending on the state and specific circumstances. Common costs may include filing fees, which can range from $35 to $800, and publication fees in certain states.

How can I ensure that my LLC remains compliant with state-specific regulations during the transfer process?

To ensure compliance with state-specific regulations, research the applicable laws and consult with knowledgeable professionals.

Can I move my LLC from California to Florida?

Yes, you can move your LLC from California to Florida by undergoing a statutory conversion, often referred to as domestication, conversion, or transfer.

Which states allow LLC domestication?

LLC domestication is when you transfer an LLC to another state and dissolve the existence of the old LLC. It’s allowed in states such as Arizona, Delaware, Florida, and Nevada.

What are the tax implications when transferring an LLC to another state?

Transferring an LLC to another state may have varying tax implications, depending on the tax classification of the business owner, the tax laws of the old and new states, and the method of transfer.

Let us help your business stay in good standing

Learning how to transfer an LLC to another state can be a complex process. The key to a smooth LLC transfer lies in proper planning, research, and consultation with professionals. You also need to make sure your LLC stays compliant, so when the time comes to move it to a new state, you can be confident you’re in good standing.

One important thing every business owner needs to do is file annual reports, which inform your state of any updates to your LLC. LegalZoom can file your annual reports for you. You just answer a few simple questions, and we’ll make sure it’s all taken care of.

Jane Haskins, Esq. contributed to this article.