If you own a limited liability company (LLC) and are looking to move your business to another state, you may be considering LLC domestication. LLC domestication is the process of transferring your LLC’s legal domicile from one state to another. This process allows your business to keep its legal status and avoid the need to dissolve and form a new LLC in the new state.
States that Allow LLC Domestication
Not every state allows LLC domestication, but there are several states that do. According to Fortenberry Law, as of January 2022, the states that allow it include:
- District of Columbia
- New Hampshire
- North Dakota
- Rhode Island
- South Dakota
It’s important to note that the rules and requirements for LLC domestication vary by state, so it’s crucial to research the specific laws and regulations for the state you’re considering.
What is LLC Domestication?
LLC domestication, also known as conversion, is a legal process that allows an LLC to change the governing law that applies to the LLC. In other words, it’s the process of moving an LLC from one state to another while retaining the same legal entity.
Just a quick word on terminology – an LLC that it registered in the state it is operating in (it’s home state) is known as a “domestic LLC”; an LLCs from another state is known within that state as a “foreign LLC” or foreign entity.
Turning a foreign LLC into a domestic LLC is known as “domestication” and it saves you having to set up a new LLC if you are moving to a different state for example.
Process of Domestication for Limited Liability Company
LLC domestication is a popular option for businesses that want to expand their operations into other states, as it allows them to maintain the continuity of their business while taking advantage of the benefits offered by the new home state.
However, it’s important to note that not all states allow LLC domestication, and the rules and requirements for domesticating an LLC can vary from state to state.
The process of LLC domestication typically involves filing articles of domestication with the new state’s secretary of state, as well as complying with any additional requirements or regulations imposed by the home state.
Once the domestication process is complete, the LLC will be governed by the laws of the new home state, and the law of the original state will no longer apply.
It’s worth noting that LLC domestication is not the same as forming a new LLC in a different state. When an LLC is formed in a new state, it is considered a separate legal entity from the original LLC, and the original LLC must be dissolved. LLC domestication, on the other hand, allows the LLC to continue operating as the same legal entity, just under a different set of laws.
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Advantages of LLC Domestication
LLC domestication can provide several advantages for businesses and their owners. Here are a few of the most significant benefits:
- Tax Benefits: LLC domestication can provide tax benefits for businesses, as each state has different tax laws and rates. By moving to a state with lower taxes, businesses can save money on their tax bills.
- Business Opportunities: Moving to a new state can also provide new business opportunities, such as access to new markets, customers, and suppliers. This can help businesses grow and expand their operations.
- Personal Reasons: Finally, LLC domestication can be beneficial for personal reasons, such as moving to a new home
Requirements for LLC Domestication
Generally, the process involves:
- Filing Articles of Domestication with the new state
- Obtaining approval from the original state
- Transferring any necessary licenses and registrations
- Updating legal documents, contracts, and agreements
It is important to consult with an attorney or business professional familiar with the laws of both states to ensure compliance with all requirements.
It is important to note that the requirements and fees for LLC domestication can vary by state, and some states may have additional requirements or restrictions. It is recommended to consult with an attorney or business professional before beginning the domestication process.
Alternatives to LLC Domestication
If you are in a state that does not support domestication, there are several alternatives you can consider:
- Form a new LLC in the state where you want to domesticate your LLC and then merge your existing LLC with the new one. This process is known as statutory merger and allows your LLC to continue its existence in the new state.
- Dissolve your existing LLC and form a new one in the state where you want to domesticate. This option may be more time-consuming and costly than the first one.
- Convert your LLC to a corporation or another entity type that is allowed to domesticize in the state where you want to move. This option may require more paperwork and legal fees, but it allows you to maintain your existing business structure.
It is important to consult with a qualified attorney or accountant to determine the best option for your specific situation.
LLC domestication is the process of transferring an LLC from one state to another. It is a complex legal process that requires careful consideration of the laws of both the old and new states. Not all states allow LLC domestication, and those that do have their own specific requirements and procedures.
Overall, LLC domestication can be a valuable tool for businesses looking to expand their operations into new states. By understanding the requirements and procedures for LLC domestication, businesses can make informed decisions about where to expand and how to structure their operations for maximum efficiency and compliance with state laws.