How to Move or Expand a Business to Another State

If you are a business owner looking for a change of scenery or want to expand your business, learn about the legal and tax requirements before moving across state lines. Relocating a business or expanding to a new state can be complicated, but it may also greatly benefit you and your employees. This might include less taxes and fees for the business, tax incentives, a more diverse workforce, and real estate costs, among many others. Read on for tips about setting up shop in a new state.

Know About Your New Target Market and State Laws and Regulations

Before deciding to move or expand your business to a new state, the U.S. Small Business Administration (SBA) recommends updating your company's marketing plan by learning about competitors and potential business opportunities in your potential location. Then, you should take a deep dive into your business's finances to make sure they're stable enough to make the move or expand.

Once you feel secure in your company's success in a new market, you'll need to better understand the state's rules, regulations, and laws for a seamless transition. Most business types require business registration in your new state, but each state has different requirements depending on the business type. Consult with local experts like an attorney and/or CPA to ensure you meet all requirements before operating in the new state.

Transferring LLC's and Corporations to Another State: Temporary Move, Permanent Move, or Expansion

You can either permanently or temporarily move the business or expand your business to operate in more than one state.

Permanent moves:

If you decide to make a permanent move, one option is to close your business and open it as a new company in the new state. This option might require paying outstanding taxes and fees in your current location. Another option for permanent moves is a process called re-domestication. This is where you move your business to the new state (also known as changing your home state or domicile state) without making any other changes. This option allows you to maintain your company's long credit history, plus you have the chance to keep your existing contracts in place. Not all states allow companies to re-domesticate to a new jurisdiction in their state. If the state does allow it, that process may require you to:

• Complete (and file at the current state after receiving approval from the new state) an Articles of Dissolution form
• File Articles of Domestication with the new state's registration agency
• When you file, provide a completed Articles of Dissolution form and Certificate of Good Standing from your current state
• Create a plan of domestication outlining the change in location, any changes to your company's Articles of Organization, and details on who has an ownership interest in the company
• Register your business with the tax collection agency in your new state
• Sign up or register for business license(s) and permit(s) in your new state, and cancel any applicable licenses and/or permits in your old state
• If you have a DBA or assumed name for your business, withdraw the name from your current state and apply for the DBA in your new state
• Pay any sales tax on services or retail sales

Depending on your business type, you may need to file different or additional forms, and more steps may be involved. If you move mid-year, you must file taxes in both states, if applicable. Consult your attorney and CPA for help on this.

Temporary moves or expansion to another state:

If you plan to operate in more than one state or are temporarily moving your business, there are a few things you might need to do, including the following:

• File for a foreign qualification in your new state and pay any filing fees (this essentially means that you notify the new state that your business is operational there)
• Submit a Certificate of Authority (for Statement or Designation) application and pay any applicable fees
• Certificate of Good Standing from your current state
• Provide details about your company, such as the primary location and registered agent, depending on your business type

Depending on your business type, you may need to file different or additional forms, and more steps may be involved. Consult your attorney and CPA to determine whether you must pay local or state taxes and/or annual reporting fees in both states.

Sole Proprietorship Transferring to a New State

Moving a sole proprietorship to a new state is much less complicated than other business models since you may not have to register the business with the state. You may, however, have to apply for a business license or permit in the new state, cancel the business license or permit in the previous state, and pay any outstanding fees or taxes. Discuss with your attorney and CPA to determine the requirements to move to another state before committing to anything.

Tips Before You Move Your Business to a New State

• Take time to plan and research: We recommend thoroughly examining codes, regulations, and costs in the new location, such as property and income taxes, unemployment costs, and utilities, among other expenses.
• Understand business license and permit requirements: Conducting business without proper licensing can land you hefty fines, which could lead to legal issues down the road.
• Remember the IRS: Know where to send the IRS notification of your business move so it can update records, as that affects the taxes your business will be responsible for paying (sales, payroll, and any others). Understand how moving will impact your business financially in this aspect.
• Consult with local experts: Since there are so many legal rules and tax implications, finding a local attorney and CPA can be well worth it. Don't forget to meet with a local banker, too; they are essential to helping you manage your finances and referring you to service providers and professionals in the area.

WaFd Bank is Here to Help

WaFd Bank is a local bank that provides business banking solutions to help you easily manage your business. With locations spanning the Western United States, we're here to help you make banking as easy as possible, with tools and services to help you run your business efficiently and effectively. Visit your local branch, give us a call at 800-324-9375, or open a business account online today!