It sounds like a monumental task to relocate your business when you move, but it doesn’t have to be. Even the most stressful situations can be made more bearable when you have a clearly defined list of actions to take.
If you are moving out of town or out of state, you’ll probably want to relocate your business (unless you’ve decided to close it). How do you go about doing that? What if your business is entirely online?
The first thing to do: Breathe. It’s going to be a lot easier than you think. And if you’re a sole proprietor – good news! All you have to do is register your business in your new state. If you’re not moving states, you just need to change your business address.
If your business entity is in the form of anything other than “sole proprietor,” you will need to consider which of the following three choices you will make when you relocate your business when you move.
3 Options for Your Business When You Move
1. Continue operations in your previous state and register as a foreign entity in your new state
Expensive – you will be paying yearly fees for your business in both states. But sometimes, you might have a good reason to stay anchored in your previous state – if that’s the case, this option may be your best bet.
2. Dissolve the business entity in your previous state and form a new entity in your new state.
Expensive and worst tax consequences – if you’re thinking this option will give you a “clean slate,” you may want to think again. In the eyes of the IRS, you’ll be shutting down your business and then opening a new one with lots of taxable events happening. It’s a money pit that most experts recommend business owners avoid when they relocate their business to a new state.
3. Form a new entity in your new state and merge the previous entity into it.
Cost-effective and easy – most business owners use this option when they relocate their business when they move. You will be able to bypass the fees for operating in two states (option 1) and the intense tax consequences of shutting down and starting up again (option 2).
How to Relocate Your Business to Another State
Once you’ve decided which option you’ll choose for moving your business to a new state, you’re ready to take the next steps. These instructions are for option 3 only. There are three steps you’ll need to follow to successfully relocate your business when you move to another state.
1. Close your business in your previous state
You’ll need to officially close your business in your previous state to move forward. You can do that in most states by just filling out a form. Some states require that you file a final tax return when you close a business in that state. You can find out what your state’s rules are by doing a quick search online or calling the state’s department of taxation.
2. Open and merge the business in your new state
This step is much less complicated than it seems. Most state websites provide a simple checkbox you can click on the business registration form if you are merging an existing company in from your previous state. Even if yours doesn’t, you will simply print the required forms and send them in to complete the merge of your existing business to your new state.
3. Tell the IRS about your move
You can’t forget to let the IRS in on your relocation by sending them your correct new address. If you chose to relocate your business by closing and then merging your business into the new location, you’ve smartly avoided any tax consequences the IRS would impose had you closed and reopened or operated as a foreign entity.
Make sure you’re keeping track of all your expenses and fees – those will be valuable deductions and write-offs for you to take next year!
Remember, if you’re in business as a sole proprietor, you are not required to take most of these steps. Make sure to consult the proper departments in your state to get the most accurate and up to date information about doing business there!