RELOCATING YOUR BUSINESS? DON’T DISSOLVE IT—
DOMESTICATE IT.

You are moving your life to a new state for better opportunities, tax advantages, or a change of scenery. You have packed up your house, but what about your business?

Many business owners assume that moving an LLC or corporation across state lines requires dissolving their current company and starting a brand-new one in the destination state. Fortunately, for most businesses, there is a much better option called statutory domestication or conversion.

This process allows your business to change its legal “home state” while remaining the exact same legal entity. The change is accomplished by filing appropriate documentation with the state from which you are moving out and the state into which you are moving. You are switching the jurisdiction, but the entity remains the same, just governed by a new state’s laws.

Here is an overview of why you should use this process, how it works, and what happens when it isn’t available.

Benefits of Domestication
The primary benefit of domestication is business continuity. By using statutory domestication to move your business, you generally get to keep:

• The entity’s Federal Employer Identification Number (EIN).
• Its corporate and credit history. The entity’s date of formation remains unchanged, preserving your company’s longevity.
• Existing loan agreements, client contracts, vendor agreements, and real estate leases. These usually transfer automatically without requiring new signatures or assignments. In some instances, however, a party’s consent or formal notice may be required, so always consult with an attorney to see what actions, if any, are needed to transfer such agreements.

The General Steps
While every state has different forms and specific timelines, the general procedure involves the following steps:
1. Internal Approval: The owners (members or shareholders) must formally vote to approve a “Plan of Domestication/Conversion” detailing the move.

2. Entry Filing (The New State): You file paperwork (usually called Articles of Domestication or Articles of Conversion) with your new destination state to relocate your entity. These Articles are accompanied by new formation documents for that state.

3. Exit Filing (The Old State): Once the new state accepts the business, you file paperwork with your original state of formation/incorporation, terminating your entity’s existence there without formally dissolving it.

Jurisdictional Quirks
Statutory domestication is only possible if both the state you are leaving and the state you are entering have laws that allow it. While most states now permit this, there are exceptions and oddities. Some states can be restrictive regarding direct domestication, often forcing businesses to utilize a more complex merger process instead.

States do not always agree on vocabulary. One state might call the process a “conversion” while the other calls it “domestication”. It is vital to use the correct terminology for the specific state you are dealing with to avoid having your filings rejected. The rule of thumb, however, is that moving the entity out of its original state of incorporation into a new jurisdiction without changing its legal form is called “domestication”, while changing its legal form (e.g., from limited liability company to corporation) is “conversion. ” Additionally, many states refer to “conversion” while the entity formed there is moving out to another state, while accepting an out-of-state entity into a new jurisdiction is referred to as “domestication.”

When Domestication Isn’t Possible
If either the state of origin or destination state does not permit statutory domestication for your entity type, you must take the long way around using a more administratively burdensome and time-consuming statutory merger.

Conclusion
Moving a business involves navigating two distinct sets of state laws simultaneously. Because a misstep can result in temporarily losing your legal standing or accidentally dissolving your company, you should seek legal counsel to manage the transition.

If you are planning a move, contact us to help ensure your business arrives at its new home intact.