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Starting and establishing a business is challenging, but the endeavor seems almost impossible when you decide to start over again in another state.
I don't mean opening an out-of-state location but moving your business from one state to another. My company has helped scores of business owners who want to relocate. The key is to tackle the process step-by-step.
Whatever your reason for moving, starting over in a new state requires detailed planning, in-depth research and patience. Here's what to consider if you're thinking about moving your business.
Related: 6 Critical Considerations Before Relocating Your Business to Another City
Do your research
Before making any move, it's crucial to do your research. Consider any legal and regulatory concerns. Make sure you understand the new state's steps for business formation, employment, licensing and tax requirements.
Then, define the specific reasons you're relocating. Are taxes an issue? While nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming) currently don't levy an income tax, you need to find out about any local business, sales, property, and franchise taxes required by the state.
Are you moving to a state with a lower cost of living (COL)? These expenses are defined as "the cost of maintaining a certain standard of living," including housing, food, transportation, taxes, healthcare and more. The COL varies by state and fluctuates by city, so don't eliminate a state based on the costs in one specific location.
Accessing market trends and opportunities in the states you're considering moving to is also critical. Consumer demographics, market competition and economic indicators can impact your success. Compare statistics on industries and business conditions across the U.S.
Every state touts the availability of skilled labor, but the reality of your business's ability to attract and keep the right talent will vary. What are the prevailing wages for your type of business? Some companies benefit from being located near a college, which provides a pipeline of potential employees. The U.S. Chamber of Commerce keeps tabs on where the labor shortage is hitting hardest.
Also, consider your company's infrastructure needs. Depending on your business, concerns such as transportation, access to suppliers and availability of distribution centers may impact operations. Contact state and local economic development agencies for information about infrastructure and resources.
Many locales may meet your business criteria. However, they also need to fit your quality of life requirements. Does the state provide the healthcare, education and lifestyle options you need? Is the climate to your liking? Can you find the type of housing that suits your personal situation?
Related: Relocating Your Company? Don't Make These 10 Moving Mistakes.
Business domestication
We typically recommend that entrepreneurs who own LLCs and corporations domesticate (or redomesticate) their companies. This means your business ceases to exist in its state of formation and only exists in your new location.
Only 31 states and Washington, D.C. allow domestication. Each state has its own rules and processes. Check with Secretary of State offices to see which states allow domestication and their requirements.
Generally, the domestication process works in a specific order: You apply for domestication in a new state and then dissolve your company in your current home state. The process to domesticate entails getting the approval of all board members, applying for Articles of Domestication or Articles of Continuance and providing a Certificate of Good Standing and a copy of the application for Articles of Dissolution from your former state. Once approved, you'll file Articles of Dissolution in your former state. You must pay any outstanding fees or taxes.
Domestication has several benefits:
- You don't have to change your Federal Tax ID Number (Employee Identification Number/EIN).
- There's less paperwork and tax consequences.
- Your business can keep its credit history.
- You'll save money since you won't have to pay for annual reports and fees incurred by doing business in multiple states.
If your corporation or LLC wants to keep your old state as your state of formation or conduct business in both states, you must file for a foreign qualification in the new state. While every state has its own process for foreign qualification, you can usually file online for a Certificate of Authority and pay a fee.
Maintaining multiple locations means you must designate a registered agent in the state you are not headquartered in. This person must have a local address and the authority to accept legal documents and government notices on your behalf.
Sole proprietorships and partnerships
Moving your business is less complex if it's a sole proprietorship or partnership. There's still a process you must follow:
- Cancel local business licenses and permits and apply for new ones in your new state.
- Pay any outstanding fees and taxes.
- Withdraw any assumed names (Doing Business As/DBAs) from your Secretary of State's office and apply for the DBA in your new location.
- If your business bank does not have branches in your new state, close your bank accounts.
- Inform the IRS of your new business address.
- If you move mid-year, you must pay taxes in your new and old states.
HR considerations
When you decide to relocate, it's essential to tell your staff as soon as possible and that you be transparent, honest and empathetic. It's best to hold an in-person meeting, allow time for questions and provide a timeline for the move.
Do you plan to offer your team the opportunity to move with you? Most small businesses cannot afford to pay employee relocation expenses, which typically cost thousands of dollars. Will you offer them the opportunity to work remotely?
If not, consider offering them severance and/or job transition assistance. If you know local companies looking for talent, offer to make introductions. And make sure you provide employees with letters of recommendation.
Taking the required steps to ensure a seamless transition will help ensure a smooth start in your new location.
