If you are a business owner and looking for a change of scenery or want to expand your business, make sure to do your homework to 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 may provide great benefits to you and your employees. Keep reading for tips on setting up shop in a new state and hear how one California company successfully moved to Idaho with the help of an attorney, certified public accountant (CPA) and a business banker with WaFd Bank.
Moving LLCs and Corporations to Another State
Before deciding to make a 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 the new location.
Next, the SBA recommends that you take a deep dive into the finances of your business to make sure it is stable enough to make the move or expand. Once you feel secure in your company's success in a new market, you will need to better understand the state's rules, regulations and laws for a seamless transition.
If you own a Limited Liability Company (LLC), corporation, S corporation or partnership, you may need to register your business in your new state. Each state has different requirements for businesses. Consult with local experts like an attorney and CPA to ensure you have met all of those requirements before you begin operating in the new state.
Temporary and Permanent Business Moves for LLCs or Corporations
Ready to make the move to a new state? Take a moment to assess your options. You can either permanently move the business, 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, you may need to close your business and open a company in the new state. This option may require you to pay any outstanding taxes and fees in your current location. If your bank does not operate in your new state, you may also choose to close your business bank account and open a new one.
- Another option for permanent moves is a process called domestication. This is where you simply move your business to the new state without making any other changes. This is a good option to maintain your company's long credit history and may allow you to keep your existing contracts in place.
Although each state is different, the process usually requires filing Articles of Domestication with the state's registration agency and may require you to create a plan of domestication that outlines the change in location, any changes to your company's Articles of Organization and details on who has ownership interest in the company. You may also have to register your business with the tax collection agency in your new state and pay any sales tax on services or retail sales. Additionally, your new state may require a certificate of good standing from the previous state.
- Temporary moves or expansion to another state:If you plan to operate in more than one state or you are temporarily moving your business, you may need to file for 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. Consult your attorney and CPA to determine whether you need to pay local or state taxes and/or annual reporting fees in both states.
Transferring to a New State
Unlike other business models, moving a sole proprietorship to a new state is much less complicated 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. Make sure to discuss with your attorney and CPA to determine the requirements to move to another state.
How a Business Owner Moved His Company from California to Idaho
Dan Drouault, owner and president of Covington Engineering, understands firsthand the challenges — and benefits — of moving a business to a new locale. He relocated his company from Redlands, California, to Meridian, Idaho, in early 2020.
Covington Engineering produces tools and accessories to cut and polish rocks. The business did not have to remain in California since it sells to customers around the world. Drouault selected the new location based on the lower cost of living, less expensive cost of doing business and the desires of his employees. About a dozen of his 19 employees moved to Idaho.
After discovering the appeal of Idaho, Drouault spent three years planning every step of the move, including selling the facility in California and finding a new space in Meridian.
He also met with a commercial banker at a WaFd Bank branch near Meridian who helped him save money by refinancing his business property at a better rate. He continues to rely on the expertise of the team at his local WaFd Bank branch and offers these tips to other businesses contemplating a move:
- Take time to plan and do your research. He recommends thoroughly examining codes, regulations and financial costs in the new location, including property taxes, income taxes, unemployment costs, utilities and others.
- Consult with local experts. Since there are so many legal rules and tax implications, he recommends finding a local attorney and CPA. He also says meeting with a local banker is important to help you manage your finances and refer you to service providers and professionals in the area.
Business Banking Across Multiple WaFd Bank Locations
WaFd Bank is a local bank that provides business banking solutions to help you easily manage your business. With locations in eight states, we can offer guidance as you relocate your business.
Open your new Business Checking Account online today or Learn more about WaFd Bank's account options for small business.
WaFd bank was recently recognized as “Best Big Bank” in Idaho, New Mexico, Oregon and Washington state by Newsweek.
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