Now the easiest way to move an entity is to dissolve and reform the entity.
Now, if you want to do that, one of the things you have to look at
is whether or not you're going to continue
to conduct business under that same entity name.
Are you considering moving your limited liability company or business
to a different state?
Because either you have moved or there's a new business opportunity
or you're just looking for stronger asset protection laws.
Well, in this video, I'll dive into the three strategies and step by step
process is necessary to move your entity to another state.
All right, let's get started.
Okay.
So before you move your entity, the first thing you want to do is research
the state where you're planning to move your entity to,
because there may be certain filing fees, ongoing compliance and tax implications
that you're not aware of.
And actually moving that entity could create a taxable situation for you
that you don't want to engage in.
So I would highly recommend that before you make any moves,
you reach out to a professional that can analyze this
to see if that's in your best interest to actually move the entity.
All right.
Now that you've decided, hey, I'm going to move my entity.
There are actually three separate ways in which you can move an entity from state
to state, be
Now, the easiest way to move an entity is to dissolve and reform the entity.
What that means
is that let's assume that I had an entity that was set up in California.
I set up a limited liability company there, and I decide now that I'm going
to move to Florida, I'm going to be conducting business in Florida.
Well, in order to dissolve and reform, what I would do
is shut my entity down in California and then form a new entity in Florida.
Now, if you want to do that, one of the things you have to look at
is whether or not you're going to
continue to conduct business under that same entity name.
Because the name that you're using in California
may not be available in Florida because somebody else is already using it.
This is the thing that throws a lot of people off many times
is they have a name that they've built a brand under
and then they want to take the entity and move it to a different state.
But the problem is there's already an individual
in that state with an entity with that exact same name.
So you're not able to retain your name when you move it into Florida.
So the dissolving and reforming that's typically not an option for you.
Or the other issue is taxation.
So when you dissolve your entity,
then you're going to lose all the tax history with that in the all the business
history with that entity.
So if you're trying to obtain business credit in the future,
that could be a potential issue for you.
Who knows what the tax liabilities
are going to be when you shut down your entity?
So if you have to have someone analyze your business
that if you're continuing to stay in business
doing the same type of activity you're currently engaged in,
then dissolving and reforming is probably not in your best interest.
When is something like that going to be in your best interest?
Well, have you decided?
You just want to cut ties
completely with that business activity that was taking place in California?
And you're not concerned about the business going forward.
You just want a basically a clean slate, so to speak.
That would be a situation where I would dissolve and reform.
But at the same time, if I was going to do that,
you want to dissolve and reform your entity.
Don't use the same name.
Choose a different name in that instance, because if something did go wrong, say,
two years or a year before you dissolve and someone sues that old company,
they could go after your new company
that you've set up in Florida as a successor in interest.
So again, we need to analyze that now.
Another way in which you can move your entity to
another state is through what we call domestication.
So this comes up a lot.
Let's assume that you have an LLC that you set up and you realize,
hey, my asset protection laws in this state, they set up in New Mexico,
you set it up as a holding company and you realize they suck, right?
That if I get sued personally, someone can take my limited liability
company from me because New Mexico doesn't have great charging order protections.
So if you're in a situation like that and now it's just a matter of,
hey, I want to keep my business entity all set up.
I have all these contracts are set up with it already.
I have established bank accounts.
Again, these are reasons why you wouldn't want to do number one as well.
And so all I'm looking to do
is change the state in which it's formed in, because I realize
there's additional benefits there by having it in a different state
than you would like to enter into a domestication process
where you actually change the entity from New Mexico to Wyoming.
And so there's a formal process you go through
and you have to make sure that the state you're moving into permits this.
Now we do a lot of these for people that move from a state like Nevada
or a state like New Mexico and they want the asset protection benefits of Wyoming.
We re domesticate.
That means your LLC stays the same.
It gets moved over to Wyoming, formed in Wyoming after it's formed there.
Then we shut it down in the prior state.
And when you go through that process, everything stays the same.
You still keep your area and you still keep your bank accounts.
You still keep your business history.
It's just like moving if you move from New York,
let's say, to Ohio, okay, that's all you're doing.
You're just changing your state of residence.
Now, another way you can do this is to refer to as a foreign qualification.
That is where you actually do not move your business entity.
It stays where it's at.
So if I had a Texas company that had set up a Texas LLC
and now I'm going to be doing business in Indiana, I would just for and file
that entity in Indiana to conduct business there.
So foreign qualification is where you're typically going to be working in
two separate states.
That's when you explore that option.
Now, in choosing the right method,
I mean, I went through the pros and cons of this.
You really need to work with someone to figure out what's most suitable for you
based upon your type of business, what you're looking to accomplish out of it.
Because in each situation, as I stated, there's going to be state specific filing
requirements and whether or not it's even allowed for what you're trying to do.
And so you want to know that before you go forwards.
The biggest mistake that we see people make who attempt to do this
other than the foreign qualification, is they shut their entity down first
without exploring their options.
So you want to make sure
you explore your options, make sure it's all laid out ahead of time.
You've got a roadmap, then you make the move
and be sure you understand the taxes
and compliance requirements of the state, what you're moving the entity into,
because it may be that there are different
tax implications there as far as how the business is being conducted.
Let's say I was moving from Florida to Tennessee.
Tennessee has a franchise tax on business entities.
So what didn't apply in Florida is now going to play when I'm in Tennessee.
So that could have a serious impact on my after tax cash flow on an annual basis.
Now, the most important thing that you have to remember
whenever you switch an entity up like this is that you update
your operating agreement and any contracts and any banking account
information you have in vendors and licenses and permits and all the stuff
that's required are necessary to run your business.
Because if you're involved in a lawsuit
and I've seen this many times, people send me their operating agreements,
they've shifted their entity to a different state.
But then I look at their operating agreement.
It states that it's still a New York LLC, when in point of fact,
I realize it's now a Wyoming limited liability company,
but nothing in their operating agreement has been updated.
None of their banking relationships have been updated.
And so this could be their Achilles heel in the event of a lawsuit.
So, again, if you're considering moving your entity,
the last step in, which is probably the next most important step in
this process, is going to be updating that operating agreement.
Hey, if you want to learn more about this in real estate
asset protection, I'd like to invite you to our tax and asset protection event.
We teach it live every couple of weeks.
You can see the link in the show notes below.
And when you come on to this event, you're going to learn all about taxes
and asset protection as it pertains to business planning, real estate investing.
But more importantly,
you're also going to be able to get your specific questions answered,
because not only will I be teaching the event, I bring a team with me.
Why have attorneys and CPAs on there that will be there
to answer your questions and how it pertains to your business?
I hope to see you there.