The original Adas Israel Synagogue in Washington, D.C. being relocated to avoid its demolition.

Businesses regularly look to move around within the United States, and these are often down to expansion, headquarters relocation or a search for company law benefits. In these cases, there are several alternatives to dissolving one company and starting a new one.

This blog sets out some of the pros and cons of each approach, and when they might be most appropriate.

Registering the existing company in the new state as a “foreign corporation”

This is essentially establishing a branch of your current LLC or corporation in the other state in which your firm wants to establish a business presence.

Pros

1. Retains the familiar company law of where the company is already incorporated;
2. Corporate administrative requirements stay the same; and
3. Allows a company incorporated in, for example, Delaware (with a well-established system of corporate law) to retain those advantages while operating the business from a different state.

Cons

1. Requires the payment of franchise taxes in both the operating state and the state of incorporation (subject to minimum thresholds – for example, Texas has a “no tax due” threshold of US$1,080,000);
2. Requires the maintenance of a registered agent in multiple states; and
3. Annual filings will need to be made both in the state of the incorporation and in the state(s) where it is registered as a foreign corporation.

Best use

When your firm wants to retain the advantages of the established case law and administrative requirements in a state such as Delaware, but wants to establish operating bases elsewhere.

Converting the company (continuation/conversion)

Continuation moves a company from one jurisdiction to another without the need for a merger or dissolution; it simply removes itself from one register and adds itself to another.

Pros

1. The company is able to change its domicile without needing to transfer assets and liabilities into a new entity;
2. Simpler process than a merger;
3. Only one registered agent or franchise tax fee to pay at any one time.

Cons

1. Not available in every jurisdiction (although available in most);
2. Change of applicable company law may require new internal procedures and administration.

Best use

Moving a company that operates in one state to a jurisdiction such as Delaware or Nevada to prepare it

1. to receive investment and/or
2. to support growth and expansion into multiple states.

Starting a new company and merging the existing company into it

In this case, start a new company in the new state and transfer the assets and liabilities of the existing entity into the new one through a merger.

Pros

1. Can be applied in every jurisdiction;
2. There is only one registered agent fee and one franchise tax to pay on an annual basis going forward, as there is only one state registration at the end of the process;
3. Simple transfer of assets as part of merger process.

Cons

1. More complex paperwork and procedures;
2. More expensive process due to state and legal costs; and
3. Temporary cost overlap between registered agents in two jurisdictions.

Best use

When the original company’s jurisdiction does not permit continuation (e.g. Nevada).

Contact us

To learn more about starting or moving your company within the US, visit our webpage on USA company registration or contact us at .

Image credit
By Historic American Buildings Survey [Public domain], via Wikimedia Commons

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