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Starting and establishing a business is difficult, but when you decide to start again in a different state, the endeavor can seem nearly impossible.
I don’t mean opening a location out of state, I mean relocating your business from one state to another. My company has helped many business owners who want to relocate. The key is to take the process step by step.
Whatever your reason for relocating, starting over in a new state requires detailed planning, thorough research, and patience. If you’re considering relocating your business, here are some things to consider:
Related: 6 Important Things to Consider Before Relocating Your Business to Another City
Do your research
Before you take action, it’s important to do your research. Consider any legal and regulatory concerns. Make sure you understand the procedures for business formation, employment, licensing, and tax requirements in your new state.
Next, define the specific reasons for relocating. Will taxes be an issue?Currently, nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) do not impose income taxes, but you should find out about local business, sales, property, and franchise taxes that are state-mandated.
Are you moving to a state with a lower cost of living (COL)? These costs are defined as the “cost to maintain a certain standard of living” and include housing, food, transportation, taxes, healthcare, etc. COLs vary from state to state and even city to city, so don’t rule out a state based on the cost of a particular location.
It’s also important to understand the market trends and opportunities in the state you’re considering moving to. Consumer demographics, market competition, and economic indicators can affect your success. Compare statistics on your industry and business conditions across the United States.
Every state boasts a supply of skilled workers, but your company’s ability to attract and retain the right talent varies by state. What is the going rate for wages in your industry? Some companies benefit from locating near universities, providing a pipeline of potential employees. The U.S. Chamber of Commerce says: Labor shortage are the hardest hit.
Also consider your company’s infrastructure needs. Depending on your business, issues such as transportation, access to suppliers, and availability of distribution centers may affect your operations. Contact your state and local economic development agencies for information about infrastructure and resources.
Many communities may meet your business criteria, but they also need to meet your quality of life requirements. Does the state offer the healthcare, education and lifestyle options you need? Does the climate suit your preferences? Can you find the type of housing that fits your personal situation?
Related: Relocating your business? Don’t make these 10 common mistakes people make when relocating.
Domesticating business
We typically encourage entrepreneurs who own an LLC or corporation to domesticate (or re-domesticate) their company, which means the business will no longer exist in the state in which it was founded, but will only exist in the new location.
Domestication is permitted in only 31 states and Washington, D.C. Each state has its own rules and procedures. Secretary of State’s Office Find out which states allow domestication and what the requirements are.
Generally, the domestication process follows a specific order: You file for domestication in your new state and dissolve your company in your current home state. The domestication process includes getting approval from all directors, filing for domestication or continuing articles of incorporation, and submitting a copy of your certificate of health from your original state and your application for articles of dissolution. Once approved, you file articles of dissolution in your original state. You must pay any outstanding fees and taxes.
Domestication has several advantages.
- You do not need to change your Federal Taxpayer Identification Number (Employee Identification Number/EIN).
- There will be less paperwork and taxes to pay.
- Your company can maintain your credit history.
- You can save money by not having to pay annual reports and fees that come with doing business in multiple states.
If your corporation or LLC plans to remain in its previous state of incorporation or to do business in both states, it will need to apply for foreign qualification in the new state. The process for applying for foreign qualification varies from state to state, but generally involves simply applying for a license online and paying a fee.
Maintaining multiple locations means that you must designate a registered agent in states where your headquarters is not located. This agent must have a local address and be authorized to accept legal documents and government notices on your behalf.
Sole proprietorships and partnerships
If you are a sole proprietor or partnership, transferring your business is not that complicated. However, there is a process that you must follow.
- Cancel your local business licenses and permits and apply for new licenses and permits in your new state.
- Pay any outstanding fees or taxes.
- Remove all Assumed Names (Doing Business As/DBAs) from the Secretary of State’s office and apply for a DBA in your new location.
- If your business bank doesn’t have a branch in your new state, close your bank account.
- Notify the IRS of your new business address.
- If you move mid-year, you’ll have to pay taxes in both your new state and your old state.
Related: Patagonia gave 90 employees a choice — relocate within the U.S. or quit the company. They were given three days to decide.
Personnel Considerations
Once you have decided to relocate, it is important to communicate this to your staff as soon as possible and demonstrate transparency, honesty, and empathy. It is best to hold a face-to-face meeting, allow time for questions and answers, and provide a timeline for the relocation.
Will you be offering your team members the opportunity to relocate with you? Most small businesses can’t afford employee relocation costs, which typically cost thousands of dollars. Will you offer the opportunity to work remotely?
If not, consider offering severance or outplacement assistance. If you know of local businesses looking for talented employees, offer to make introductions. Also, be sure to provide your employees with letters of recommendation.
Taking the necessary steps to ensure a smooth transition can help ensure a smooth start in your new location.
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