In the USA, Entrepreneurs cite different reasons for moving their business to another state from expansion to reducing costs. Sometimes it can be for personal reasons too.
According to Entrepreneur, here are the five main reasons for business relocation:
- Quality of Life
While it may be the right move, moving a business raises several issues, particularly about legal and regulatory matters.
Make sure you seek professional advice to avoid missteps that could leave you out of business for months, if not entirely. Here are a few tips for when moving a business to another state:
File a Foreign Qualification in the Other State
When you relocate to a new state, you must register your business in that state. If you operate under a partnership or a sole proprietorship, you’ll be required to file a DBA declaration.
An LLC or corporation, on the other hand, requires more complex legal steps. You’ll need to form your business in one state and file for foreign qualification in the other states where you conduct business. This approach is cheaper and can be set up quickly. However, foreign qualified businesses typically have to pay annual report fees and taxes in both states.
Add a Business Location
How you deal with moving to another state greatly depends on whether you’ll continue doing business in your former state or not. The concept of doing business in a particular state relates to whether you are operating in it, you have business locations, or have a tax nexus or tax presence in that state.
Before adding a business location, consult with a business attorney and a tax advisor to avoid missteps and tax consequences that may lead to huge financial losses.
Form a New LLC and Dissolve the Old One
If you intend to form a new business or merge into a new corporation, you’ll have to go through the process of dissolving the old one first. There are several approaches to accomplishing this: merge the two businesses, liquidate the old business and set up a new LLC altogether, or, in the event of multiple-member LLCs, have members of the old business transfer their percentage of ownership to the new one.
Forming a new LLC has its own disadvantages; for instance, you’ll have to establish new business accounts and get a new tax ID number, not to mention, you may lose the good credit score your business built over the years.
Federal Tax Issues
Moving your business to another state may result in income tax issues to the business, as well as, its shareholders. For instance, when a business with appreciated assets is liquidated, it records income. Also, shareholders who receive assets upon liquidation must also record income if their stock appreciates. Ensure you learn more about other income tax considerations.
Other Things to Consider
First, moving costs -the cost of moving business depends on several variables, including size, distance, time of the year, as well as, whether you’ll do-it-yourself or hire a pro mover.
A moving cost estimator tool, can help you get more a more specific breakdown on moving costs and this is a good start as there are legitimate ways movers increase final costs and you want to make sure you’ve budgeted accordingly.
Secondly, staffing options -unless your current employees are willing to make the move too or can telecommute, you’ll have to hire new ones. Be gentle and ethical when dismissing employees.
You also have to think of new marketing strategies that will ensure business growth in the new state. Focus of high-impact local marketing strategies like custom coupons, promotions, or offering heavily discounted products.