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Not all entrepreneurs are able to establish an S corporation to go along with whatever enterprise they are attempting to maintain on a day-to-day basis.
Congratulations on building a thriving business! Not all entrepreneurs are able to establish an S corporation to go along with whatever enterprise they are attempting to maintain on a day-to-day basis. Moving out of state might not be in your immediate future, but it does remain a possibility – after all, life is unpredictable and your circumstances could change as you advance your career and professional prospects in general. While this process isn’t difficult, there are some catches you should know about before the transfer can run smoothly.
Is It Even Necessary?
First of all, you’re probably curious about if moving the S corporation is a necessity in the first place. In short, yes, yes it is. Even if your business is conducted 100% online, there are no exceptions for that model. If you plan on running your business in a new state or across state lines, then you are obligated to register your S Corp in whatever new state that is.
Some Available Options
Luckily, you do have some options at your disposal, but it all comes down to the applicable laws in both the state you reside in now and the one you want to move to, so let’s talk about them:
- Form a brand new corporation: To do this, you are going to have to start a new S Corp in your new state and then combine it with the corporation you already own. This way, you can retain your current Federal Employer Identification Number or FEIN.
- Register as a “foreign entity”: Another possibility is to register as a so-called foreign entity. Be aware, however, that you’ll need to pay fees in both states, as well as file reports and keep an agent in both places.
- Close your old S Corp: It might be simpler to close your old S corp and then begin a new one. This method is called the “dissolution and formation” process, but there are more paperwork and accounting issues to iron out if this is what you want to do.
- Complete a “conversion” or “domestication” process: This is possible, but it depends on where you are based now and where you intend to move – it must be allowed in both states. You can then file paperwork indicating that you have moved your corporation, but keep in mind that you’ll need to consult with the Secretary of State’s office in your home state before you proceed.
trust the professionals at the Harding group
Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for emails or phone calls and will strive for open communication with our clients. Whether you are interested in business advising, tax preparation, bookkeeping and accounting, payroll services, Training + support for QuickBooks, or retirement planning, we have the expertise and years of experience to help. We serve clients in Annapolis, Anne Arundel County, Baltimore, Severna Park, and Columbia. If you are ready to take the stress out of taxes, contact us online or give us a call at (410) 573-9991 for a free consultation. For more tax tips, follow us on Facebook, Twitter, YouTube, and LinkedIn.