Small business owners aren’t restricted to operating in the original state in which they open their businesses. It’s completely reasonable to move a business—successful or not—to a new location, regardless of the state. This reality is especially true for sole proprietors who don’t have to worry about letting employees go or gaining approval from their board before relocating. While it’s definitely possible to move a business to another state, it’s not always easy. Whether you’re a solo entrepreneur or run a thriving small business with several employees, you’ll need to consider the numerous repercussions that come with relocating your business out of state. This guide will cover many of the considerations that come with moving a business to another state, including taxes, licenses, permits, banking, and other requirements. Use this information to make moving your business to a new state as seamless as possible. Update Your Licenses and Permits Like any interstate relocation, a business move requires you to cut ties with 1 state while establishing yourself in another. Failing to remember each of the different registrations or licenses you need could slow down your reopening process or create extra fees—and headaches. Evaluate the licenses and permits related to your business in your current state and your future state. Start by canceling any permits or licenses that don’t transfer or aren’t required in your new state. Send official documentation that your business is closing in your current state, proving that you don’t need to renew those licenses anymore. This proof can be a simple letter or even an email to alert the permitting party—you just need something in writing. Alerting these organizations of your impending move is a better practice than letting your licenses expire naturally. This way, you won’t receive questions from governing bodies once your permits expire or potentially accrue fines because these organizations don’t know that you’ve moved. As you take steps to cancel your old permits and licenses, start working on your future requirements in your new state. Getting a jump on these—or at least familiarizing yourself with the paperwork—can mitigate any delays or roadblocks from acquiring the required operating documents. Let the IRS Know Believe it or not, moving states is a federal issue. The IRS includes your current address in your federal Employer Identification Number (EIN) paperwork and uses it to send you mail and to analyze the impact of small businesses in certain areas. There are multiple ways to tell the IRS that your address has changed. You can call them, complete a change of address form, send in a written statement, or use your new address when you file your tax return. These options give you flexibility when notifying the IRS of your business move. Decide What to Do With Your LLC If you operate as a sole proprietor, you can pretty much pack up and leave whenever you want. You don’t need to worry about state registration and can start working in your new state whenever your licenses and permits get approved. However, moving becomes more complicated if you have an established business entity—even an LLC. Your first option is to dissolve the LLC in the original state and re-establish it in the next. For this step, you will need to file Articles of Dissolution with your current state to alert governing bodies that you no longer operate there. You can find examples of these articles online, or check to see if your state has a Certificate of Termination template that you can complete. If you fail to let your state know you no longer operate there, you may be expected to keep paying taxes for your business even after it closes. The state doesn’t know you closed and will estimate your taxes accordingly. Some states also have fines for failing to alert them to the dissolution. Once you have terminated your business with your current state, you can file as a new LLC in your new state. Keep in mind that state filing fees (and annual renewal fees) change by state, so your new location could be more expensive to operate in than your previous one. If you don’t want to terminate your LLC, you can file a foreign qualification in your next state—or let that state know that you will be operating there while staying registered in your old state. The foreign qualification is often used if you plan to expand your business: for example, if you’re opening a second location in a new state while continuing to operate in the first one. This option can also be used for partnerships where a single partner is staying in-state while the other is moving. Talk with a lawyer about your moving options to find the best option possible. Consult With Your Bank Along with updating your customers and local authorities, talk to your bank about the move to ensure they can accommodate you. If you operate out of a national bank, this could be as simple as changing their records with your updated address and issuing new checks after you move. However, if you opened your account through a local bank or credit union, they might not service your new area. Even in the modern era of digital banking, it’s important to have physical locations in the state you operate in. Otherwise, you are stuck working with your bank over the phone and will have to adjust your time zone to their operating hours. If you need to switch banks, consider opening an account at a nationwide chain for an easy transition. You can always switch back to a local credit union after you move, but keeping your money isolated during the moving process can prevent confusion and disruptions to your operations. Time Your Move Carefully Not everyone has the luxury of choosing when they move—but if you can, try to schedule your transition in the new tax year. If you move your business mid-year, you will need to file your business taxes in 2 different states, complicating your taxes and slowing down the filing process. However, if you close your business at the end of the year and then reopen at the start of the next, you can keep your companies separate, tax-wise. Your family might also appreciate the end-of-year move, as your kids won’t have to switch schools in the middle of the semester and can start fresh at a new location in January. Evaluate Your Operating Budget Depending on where you’re moving, you could either save money or exhaust a lot of capital through this relocation. Different states have different guidelines for running a business, and everything from your annual filing fees to employee wages may change. You might not know the true impact of the move on your professional finances until you get settled in your new area, but you can estimate the cost of moving out of state. Work through your expense sheet to calculate which costs are going up and where you can save money. Below are a few potentially impacted expenses. \t \tPayroll: Minimum wage varies by state and even by city. Hiring the same number of employees for the same jobs could cost you much more. \tState income tax: Not all states have income taxes—so you may or may not have to account for income tax, depending on your move. \tGas and utilities: If you have a delivery-based business, you will need to adjust your budget to reflect local gas prices. The cost of electricity and water could also increase. \tInsurance costs: Some states have higher insurance premiums than others. This is particularly true if you are moving to a high-risk area, like opening a business on the beach or in a fire-prone county. \tLicenses and application fees: The cost of doing business could go up with more expensive annual filing costs. \tRent and real estate: Whether you own or rent your business location, the cost can increase or decrease monthly depending on the state. This expense could be even higher if you try to move your business before your current lease agreement is complete. These changes in operating costs could force you to adjust your prices to maintain profitability. By estimating your extra costs beforehand, you can set your costs from the get-go rather than raising them after a few months in operation. Check Local Hiring Laws If you are planning to hire employees in your new state, familiarize yourself with local hiring and firing guidelines. Along with minimum wage, see how prevalent unions are in your area—especially if you don’t currently live in a union-heavy state. You may need to follow specific hiring practices, report new hires to your state, and change your termination policies to follow local laws. You may want to consult an employment attorney before moving or see if there are any state-provided resources to improve the hiring process. Knowing these changes ahead of time can prevent unwanted fines or even lawsuits because you didn’t know the new rules when you moved. Prepare to Move Professionally and Personally Once you have all of your documents, permits, and taxes in order, you can focus on moving your business in the same way you move homes. Decide which assets and equipment you want to move across state lines and which items you would rather sell off and buy fresh later. Update your business cards, email signatures, and other letterheads to reflect the move. Inform your existing customers that you’re closing and launch a marketing campaign in your new area. Deciding to move your company across state lines may seem overwhelming and daunting, but if you take the necessary steps and plan accordingly, you can effectively move your business from one state to the next. As soon as you know that you’re moving, begin the transition process to ensure that every aspect of your licensing, permits, and other paperwork is covered.