Key Takeaways:

  • Tax Advantages: Nevada offers no state income tax, corporate tax, or franchise tax, making it attractive for businesses relocating from California.
  • Conversion vs. Domestication: Businesses can either convert to a Nevada entity or domesticate in Nevada while retaining their original formation date.
  • Legal Requirements: Transferring operations requires board and shareholder approval, document filings with both states, and compliance with Nevada regulations.
  • Additional Compliance: Updating business records, IRS information, financial accounts, and notifying stakeholders is essential.
  • Challenges and Considerations: Business owners must evaluate physical presence laws, regulatory differences, and operational costs before moving.

How to move a corporation from California to Nevada typically originates from a need to avoid the higher income state taxes in California. The rates aren't just high — California leads the pack in the highest income state tax with New York and Hawaii. If you move a business from one state to another, the state laws of both states should be reviewed before moving forward.

Moving a corporation involves more than simply changing an address. Due to California laws, the business must operate — and in many cases, the owner must be present at the location — in California. However, with the increase in e-commerce, business owners with multiple entities who provide a range of products and services are seeing that the requirement of a physical presence is less of an issue.

If you plan to keep operations running in the state of formation, but you will also open new locations in the new state, most states will require that you file as a foreign authority rather than moving the corporation from one state to another. If you are moving all operations to the new state, then establishing the corporation in the new state is required.

Converting a Business From California to Nevada

To move a California corporation to Nevada, a conversion plan must first be drafted, and the board of directors and either the shareholders of the corporation or the members of the LLC must approve it. The California secretary of state must then approve it.

The corporation can be converted to a Nevada corporation or LLC (limited liability company). All conversion plans must include the state-required elements to gain approval. When submitting the plan, also known as the Articles of Conversion, the Nevada secretary of state will expect to see the following:

  • Articles of Incorporation for corporations.
  • Articles of Organization for LLCs.
  • Any necessary amendments.

Why Move Your Corporation to Nevada?

Relocating a business from California to Nevada has several advantages beyond just tax savings. Some of the main reasons businesses consider moving include:

  • No State Income Tax: Nevada has no corporate income tax, franchise tax, or personal income tax.
  • Business-Friendly Regulations: Compared to California, Nevada has fewer regulatory burdens, making it easier to operate.
  • Asset Protection: Nevada laws offer strong protections against business liability and creditor claims.
  • Lower Cost of Living and Business Operations: Business owners and employees may benefit from lower living and operational expenses.
  • Privacy for Business Owners: Nevada does not require the disclosure of shareholders or officers in public records.

However, business owners should carefully evaluate whether moving makes sense for their specific industry and operational needs.

Domestication in Nevada

In Nevada, domestication is a process that allows a foreign entity to incorporate in Nevada. An example of a foreign entity is a business that was officially formed in another state. Once domesticated, the entity will be fully recognized in the state and must comply with all Nevada laws. The corporation will maintain the original start date of origination, not the domestication date.

Domestication requires state approval, but it is different from a conversion because a written plan is not necessary and the overall process is much easier. The board of directors and shareholders of the corporation or members of the LLC must approve the domestication. The process for this will be set in their operating agreement or shareholder agreement. Then the following documents must be submitted to the Nevada secretary of state:

  • Articles of Domestication.
  • All charter documents of the existing entity.
  • All charter documents for the new entity.
  • The name, address, and phone number of the registered agent of the new entity.
  • A certificate of good standing from California.

The newly domesticated entity is provided options regarding its future operations. The options include:

  • All operations in California will cease and will only happen in Nevada.
  • The corporation may exist in Nevada but still exist and operate in California.

If operations continue in California, a foreign entity filing with the California secretary of state is required.

Steps to Domesticate Your Corporation in Nevada

To domesticate a California corporation in Nevada, follow these steps:

  1. Review Business Structure
    • Confirm whether domestication is allowed under California and Nevada laws.
    • Decide whether to continue operations in California as a foreign entity.
  2. Obtain Approvals
    • Hold a board meeting to approve the move.
    • Secure shareholder approval as required by corporate bylaws.
  3. File the Necessary Documents
    • Submit Articles of Domestication to the Nevada Secretary of State.
    • Provide a Certificate of Good Standing from California.
    • File Articles of Incorporation or Articles of Organization in Nevada.
  4. Obtain a Nevada Business License
    • All businesses must register with the Nevada Secretary of State and obtain a state business license.
    • Additional local permits may be required based on the business type.
  5. Update Business Registrations and Filings
    • Close or withdraw your corporation’s registration in California (if ceasing operations there).
    • Notify the IRS of your change of location.
    • Update banking, payroll, and vendor agreements to reflect the new corporate domicile.

Additional Steps to Take

After the formalities are completed with Nevada and California, there are additional steps the corporation must take to operate properly as a business, such as:

  • Notifying the post office of the official address change.
  • Updating all financial accounts with the new name, address, and phone number.
  • Updating the Internal Revenue Service (IRS) with the new name, address, phone number, and other relevant information changes.
  • Sending notifications to your client base to keep them informed, even if your business takes place online.
  • Notifying vendors and partners of the updated name, address, and phone number.

If contracts are in place with vendors and partners, they will need to be changed to reflect the new name. The full name of the corporation includes the state. For example, "Smith, INC, a California Corporation" would be updated to "Smith, INC, a Nevada Corporation."

Potential Challenges When Moving a Business to Nevada

Despite the advantages, moving a corporation from California to Nevada comes with some challenges, including:

  • Physical Presence Laws: If a business still operates in California, it may be subject to California taxes and regulations.
  • Employee Considerations: Businesses with employees in California may face additional payroll tax and labor law compliance.
  • Cost of Relocation: Moving can involve administrative costs, legal fees, and filing expenses.
  • Contractual Obligations: Certain contracts with vendors, clients, or lenders may need to be renegotiated.
  • Tax Implications: While Nevada has no corporate income tax, businesses may still be subject to federal tax requirements.

Business owners should consult with legal and financial professionals to ensure they navigate these challenges effectively.

Frequently Asked Questions

  1. What is the fastest way to move a corporation from California to Nevada?
    • The quickest option is domestication, which allows a business to transfer incorporation without dissolving in California.
  2. Do I need to close my California corporation to move to Nevada?
    • Not necessarily. You can domesticate the entity in Nevada while keeping your California registration as a foreign entity if you still operate there.
  3. How much does it cost to move a corporation to Nevada?
    • Costs vary but typically include filing fees, legal consultation fees, and business license expenses, which can range from $300 to $1,000 or more.
  4. Will my business still be taxed in California if I move to Nevada?
    • If your business has operations, employees, or significant economic activity in California, it may still owe California taxes.
  5. What are the ongoing compliance requirements in Nevada?
    • Nevada requires annual filings, maintaining a registered agent, and compliance with state business license laws.

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