december2022january2023 - 16

FEATURE
Moving a Business to a Different State
Y
Whatever the reason, your business
client might not understand that the simplicity
or complexity of moving a company
to another state depends on the entity's
legal structure.
SOLE PROPRIETORSHIP AND
PARTNERSHIPS
Moving a company to another state is
relatively simple for clients running " nonentities, "
such as sole proprietorships
and partnerships. Sole proprietorships
and partnerships do not need to register
with the state when they're founded.
However, they are required to terminate
local business licenses and permits and
then apply for new ones in the new state
and municipality to which they've moved.
They must also cover other business
obligations, such as paying outstanding
debts like sales and employment taxes.
If
the sole proprietorship or partnership
operates under an assumed
name-doing business as (DBA)-the
owner will need to withdraw the name
from the secretary of state's office. If the
company owners want to use the DBA in
the new state, they'll need to do a name
search and reserve the name in the new
state. Also, if the company's business bank
doesn't have a branch in the new state, the
business will need to close its business
accounts and find a new bank to reopen
them. Finally, the Internal Revenue Service
(IRS) must be informed of the business's
move to ensure the federal tax ID or federal
employer identification number (EIN) on file
reflects the updated business address.
Clients should use Form 8822-B to report
the change of address.
And, of course, if the move is made
mid-year, your client must submit tax
returns in both states.
CORPORATIONS AND LLCs
Because corporations and limited liability
companies (LLCs) are required to register
with the state in which they are founded,
the process is a bit more complicated.
Once your clients decide to move their
corporations or LLCs to a new state, they
have two options. They can either 1) dissolve
the company in their former state
and file to reform it in the new state, or 2)
keep the original state as the company's
home state and file for a foreign qualification
in the new state.
Filing for foreign qualification makes
sense if a company still plans to do business
in both the state the business left and
the state to which the business is moving.
If that is the case, your client must contact
the new state's secretary of state office
to understand the process for foreign
qualification. Typically, a business can
register online or by mail for a certificate
of authority and pay the appropriate
fees. Some states require proof that the
company is in good standing in its home
state, which means it complies with incorporation
protocol and has paid its taxes.
The business owner will need to
provide details about the company, such
as the corporation's name, list of corporate
officers, the domestic state,
stock information, the local
mailing address, and the
registered agent. Registered
agents are people or companies
with the authority to
accept service of process (legal
documents and government
notices) on behalf of a company.
However, if your client does not
plan to conduct business in the original
state, it makes more sense for the
By Nellie Akalp
our clients might have many reasons to move their businesses to another state: better market
opportunities, more prospective customers, or access to a more skilled workforce, to suggest a
few. Or your client might prefer another state's small business tax breaks or incentives given to small
businesses. The reasons for moving could be personal: to be closer to extended family, cheaper housing
(or cost of living), or even a better climate.
businses owner to permanently close
the business there and then register a
new corporation or LLC in the new state.
Although closing-a-business protocols vary
by state, most states require the following:
* All board members in a corporation or LLC
must agree to the closure and move to
another state. Also, the agreement should
be recorded in the meeting minutes and
signed by all parties.
* Incorporated entities must also file a
" Certificate of Termination " or " Articles
of Dissolution " with the secretary of
state. Again, before a state dissolves
a company, the business must be in
good standing.
* The corporation or LLC must also pay all
debts belonging to the company, and any
remaining assets must be distributed to
the members/owners. How the LLC files
its taxes determines if taxes are due on
the distributed assets.
Once the company has permanently
been closed in the previous state, the business
owner must re-register in the new
state by reserving a business name, filing
Articles of Incorporation, and acquiring the
required business licenses and permits.
STATUTORY CONVERSION OR
DOMESTICATION
Another alternative for changing a
company's state of formation is through
a statutory transaction called a conversion
or domestication; however, not all states
offer this option.
Conversion/domestication
(also
referred to as redomestication) relieves
the entity from having to start over and
form a new LLC or corporation in its new
state. After the business completes the
conversion/domestication process, it no
longer exists in the previous state.
In the states that allow redomestication,
the
process is straightforward.
Companies apply for conversion/domestication
in the new state by submitting
Articles of Domestication-or Articles of
16 DECEMBER 2022/JANUARY 2023 ■ www.CPAPracticeAdvisor.com
Continuance. Typically, the company must
provide a Certificate of Good Standing from
the original state of formation and a copy
of the Articles of Dissolution form from the
old state. Once redomestication has been
approved by the new state, the company
dissolves the business in the old state by
filing Articles of Dissolution.
States allowing domestication include:
* Arizona
* California
* Colorado
* Delaware
* District of
Columbia
* Florida
* Idaho
* Indiana
* Kansas
* Kentucky
* Louisiana
* Massachusetts
* Maine
* Mississippi
* Nebraska
* New Hampshire
* New Jersey
* Nevada
* Pennsylvania
* South Carolina
* South Dakota
* Texas
* Utah
* Virginia
* Washington
* Wisconsin
* Wyoming
PAYROLL REQUIREMENTS
In most cases, if a business employs
workers in a state, it is required to register
the company with that state's department
of finance and unemployment office.
Employers must abide by the rules and
regulations covering employees in every
state where that worker earns money for
the company, even if the business is not
physically located in the state. Payroll tax
responsibilities include reporting employee
income tax to the state and contributing
to payroll taxes, such as Social Security
and Medicare. Every state also requires
employers to contribute to the state's
unemployment insurance tax (UI). UI is a
federally-mandated, state-run program
that provides temporary payments to
unemployed workers whose employment
status is not a result of their actions.
Some states have reciprocal agreements
for multi-state employers. In those
states, taxpayers who live in one state and
work in another may file for tax exemption,
which relieves them from paying taxes in
both states. ■

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