Updated November 24, 2020:

Changing the state of incorporation to Delaware can be a good decision since Delaware has some of the most business-friendly laws in the country. To change your state of incorporation, you would need to cut ties with your original formation state and re-form your company in Delaware.

Changing Your State of Incorporation

Corporations have the same rights as "natural persons" and are considered citizens in their state of incorporation. In some cases, a corporation may decide that it wants to change its incorporation state, which is a process known as "reincorporation." The main component of reincorporation is cutting ties with the original incorporation state and starting a relationship with the new state.

To alter your business's state of incorporation, you have three options:

  1. Dissolve your company and then form a new company in another state.
  2. Form a new corporation and then merge it with your previous company.
  3. Dissolve your corporation and then file a conversion certificate to reincorporate.

You may need approval from your company's shareholders or board of directors before you can reincorporate. With small businesses, meaning companies run by one or two people, a vote to reincorporate may not be necessary. In this case, the owner's decision would be enough to change the state of incorporation. If your business has a formal corporate structure, you would need to adopt a corporate resolution before beginning the reincorporation process.

Methods of Reincorporation

The most common way to change your state of incorporation is to dissolve your corporation and then start a brand-new company in a different state. To dissolve your company, you should visit the website of your secretary of state. On this website, there should be information about how to end your corporation. In most states, this involves a certificate of dissolution filing. There may be other documents that you will need to file to formally end your company.

You must complete the dissolution process correctly. Failing to completely end your corporation means that you still may need to pay taxes in your original state of incorporation.

Once your original corporation has been legally dissolved, you can form a new corporation in a new state. You can start your corporation by filing articles of incorporation in your new state, and you can even use the name of your original company as long as it isn't already registered.

If you choose this reincorporation option, there are a few other steps you'll need to complete. For instance, you'll need to file one last tax return for your original corporation. You'll also need to close your old company's bank accounts and end any outstanding relationships. Finally, you'll need a new Employer Identification Number (EIN) for your new corporation. This reincorporation option is usually the best choice for small businesses.

Forming a new corporation in another state and then merging it with your current corporation is another option for changing the state of incorporation to Delaware. This option is usually the right choice if you don't want to change your EIN and your old corporation owns a large number of assets.

Refer to the Secretary of State website in your new state to learn the specific requirements for forming a new corporation. You should also be able to find the steps for drafting and filing a certificate of merger. The certificate of the merger will alert the secretary of state that two business entities plan to merge their operations. The certificate will also state which of the entities will remain after the merger, which is referred to as the surviving entity.

This type of merger is called an F reorganization for the purposes of federal taxation. These mergers are formalities, which means that your new corporation can continue doing business using the old business's EIN. To change your state of incorporation, you could also apply for foreign entity status and a conversion certificate in your new state if the laws allow.

Delaware is one state that allows this reincorporation method. If you want to change your state of incorporation to Delaware, you can apply for foreign corporation status in the state. Once you have permission to do business in Delaware as a foreign corporation, you can file a certificate of conversion to change your business to a domestic corporation.

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