How to Move a Corporation From California to Nevada
How to move a corporation from California to Nevada typically originates from a need to avoid the higher income state taxes in California.3 min read
2. Domestication in Nevada
3. Additional Steps to Take
Updated July 1, 2020:
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 isn't just about 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.
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 given options for the future of the entity and how it will operate. 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.
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."
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