If you’re interested in transferring your company from one state to another, domestication is the legal process that allows you to change which state governing law applies to your company. For most clients all you notice is a simple change of registered agents.
For example, if you initially formed your company in the state of Arizona but wish to transfer it to the state of New Mexico, this can be achieved through domestication. After completing the domestication process, your company will be governed by NM law rather than Arizona law. Arizona state law will no longer apply to your company.
How to Domesticate Your Company
In order to officially transfer your company from one state to another through domestication, you must first obtain a Certificate of Good Standing from the state in which your company is currently registered.
Provide this certificate along with Articles of Domestication to the Secretary of State (or appropriate agency in charge of business filings) of the state to which you are moving your company. In addition to these filings, you must officially dissolve your company in your now “old” state.
The domestication process is an easier one to complete than dissolving your company in the old state and forming a new company in the new state. Through domestication, you can keep all over your company’s relationships, accounts, filing numbers, ratings, and more, without any kind of interruption.
Transferring Your Company to New Mexico
It’s important to note, however, that in order to complete the domestication process outlined above, the state to which you’re moving must support domestication. New Mexico, for example, does not have any provisions in its laws that support entity domestication.
Therefore, if you’re looking to move your company to New Mexico, you’ll have to choose a method other than domestication. Two options available to you are registering your company as a foreign entity with the state or forming a new company in the state.
Register Your Company as a Foreign Entity
Operating your business in another state requires that you register your company as a foreign entity with that state. This is typically a very common practice for companies, whether implemented to expand the reach of a business or to form corporate headquarters in one state while operating in many.
The process of registering your business as a foreign entity is a relatively straightforward one. It requires that you submit an application to the state’s agency in charge of business filings along with a certificate of authority for your business. Note that there are typically fees associated with these filings.
Additionally, this method allows you to keep your company’s tax ID number, bank accounts, permanent address, and more, even while operating in a new state.
Note, however, that you will need to maintain a registered agent in each state that you operate, along with making sure you keep up-to-date on all filing requirements. There may also be other additional operating fees or taxes that apply based on the state in which you’re conducting business.
Form a New LLC in the New State
Another option you have is forming a new company in the new state, while dissolving your company in the old state. You might opt for this method if registering and conducting business as a foreign entity presents your company with too many challenges.
There are different approaches to completing this method. Your company’s members may decide to contribute their interests over to the newly formed company. Or, you may decide to merge the two companies. However you choose to accomplish it, the process can get complicated and may require the help of an attorney.
Also, as mentioned earlier, there are a few inconveniences to this approach that you may want to avoid if you have other options. For example, in certain ways you’ll be starting over with the new company and will be required to form all new accounts, tax ID number, and more.
Tax Considerations When Moving Your Company
The tax implications of either moving your company or forming a new one in a new state is an important factor to keep in mind. For example, the best tax classification for your LLC in one state might not be your best choice in another state with different income tax rates.
Whether you’re moving your company or forming a new one, you’ll want to consult with an accountant or attorney that can advise you on the tax implications of moving your company.
While the actual registration or formation process of setting up your company in a new state is fairly straightforward, it’s best to seek expert counsel on how the new state law, local ordinances, and more may impact your company.
Moving your company to a new state will often require that you register with the appropriate state and local tax authorities, apply for the appropriate business licenses, maintain a registered agent, as well as updating many other administrative details. Getting these steps completed correctly is a great way to set your business up for success.