Moving to a new state? Your home business might need to change.
I'm getting ready to move across the country. It's a very busy time for me and my family, and I'm trying to keep my home business going as well. It's been a crazy few months as I've moved from being sick to dealing with my grandmother's end of life to getting ready for a cross-country move (one that involves selling my home).
In the midst of everything, this thought struck me:?I've got a home business registered in Utah. What happens when my home business is located in Pennsylvania?
It's a thorny issue that I'm struggling to deal with right now, when I've already got so much to deal with, but it's an issue that needs facing.
What's Required in Your New State?
Check into what is required in your new state. The Small Business Administration offers a search tool that can help you find information on what is required in your state of residence.
What you need depends on what business organization you have, as well as what type of business you own. The rules for running a salon or pet grooming service out of your home might be different in your new locality. Realize, too, that it's not just your state when it comes to moving your home business; you might have county and city regulations to deal with as well.
Utah is pretty easy to deal with when it comes to small business regulations — and it's pretty cheap to boot. Moving almost anywhere else means that I'm going to have pay more to register my business properly, and possibly to renew the license each year. (At least it's all tax-deductible, amiright?)
I'm keeping my business here in Utah for the time being. I know I'll have to change it up, but I figure that I've got until the post office stops forwarding my mail to get things squared away. At least, I paid the $15 to renew my license here in Utah for another year, and I'll use the breathing room (and the fact that I do almost everything online anyway) to make sure I do everything exactly right as I move forward with registering my home business in Pennsylvania.
What are the Home Business Registration Options?
If you are a sole proprietor, it's fairly easy to make the switch in most cases. You just need to go through whatever the “doing business as” registration is required in your new state, and stop doing business under the old state.
Things get a little more complicated if you have a Limited Liability Company (like I do) or if your home business organization is S Corporation.
In these cases, you generally have three options:
- Keep your business registration in the old state, and then register as an out-of-state/foreign business in the new state.
- Get rid of the old home business altogether, and just start a new one in the new state.
- Form a new business in the new state, and then merge the old business into the new one. (With the LLC, this is possible and the IRS views it as a continuation — even letting you keep your EIN as long as certain requirements are met.)
With the LLC, there is also a fourth option, which is register the new LLC in the new state, and then have all of the involved partners transfer their ownership from the old to the new.
From what I can tell, my best option is probably going to be #3, but I'll consult with my accountant before I do anything rash. While there are plenty of legal sites out there that can probably help me do the paperwork for cheap, the reality is that, in these cases, I like to have someone who knows me and my home business actually talk to me about my options, and then help me figure out the best course of action. I've had this accountant for seven years, and he's been worth every penny I've paid.
You should consult with someone before making your decision as well, since whatever you do, there might be tax consequences involved. For example, with option #1, you might need to file duplicate reports and tax information because of the fact that your home business income is?created in one state, but your business is actually?registered in another state.
I'm probably going to need to re-think my business bank account at some point. But, then again, maybe not. It depends on how this all falls out. In the end, I'm going to do whatever my accountant recommends as the least painful option (read: option with the least amount of paperwork and changing things). It's going to be a bother no matter what I do, but, then, moving is almost always a massive bother to begin with.