I am moving my single-member LLC to another state, what requirements must I fulfill when moving my business?
I am moving my single-member LLC from Oregon to Washington soon and I was wondering what process I must go about in order to complete the move without undue tax or financial burden. I am moving primarily to reduce my tax burden as Washington has no state income tax. However, is it as simple as dissolving my Oregon LLC and organizing my Washington LLC?
Also, should I just pay Q2 estimated taxes for Oregon based on what I have made thus far and then for revenues made after the move do I just need to start by paying a Q3 estimated tax voucher for Washington?
Are there any other considerations I should make?
Yes, you could dissolve your Oregon LLC and create a Washington LLC - but it could increase your overall taxes as you would be subject to a separate LLC tax in Washington (the B&O entity tax) and could be subject to personal state taxes in Oregon, unless you move to Washington. The LLC income flows through the entity and is taxed directly to the individual based on where the individual lives so if you still live in Oregon you would still be taxed in Oregon. Let me explain.
An LLC is a hybrid entity created under state law that is neither a partnership nor a corporation. From a state business law perspective, they offer their members protection from personal liability for the debts of the LLC's business much like the liability protection that a corporation offers to its shareholders.
From a federal tax standpoint, the IRS treats the LLC as an eligible entity under the “check-the-box” rules, and therefore, the LLC has the flexibility to be classified as either a partnership, an association taxable as a corporation, or a disregarded entity (DE). Obviously, a single member entity cannot be a partnership since a partnership is by its very nature a joint venture between at least two members. Thus, you are either a corporation or a DE.
Whether an LLC is treated as a corporation or a partnership is irrelevant in states that impose taxes other than a traditional corporate income tax. One example of a nontraditional state tax imposed on LLCs includes the state of Washington with its business & occupation (Washington B&O) tax (Wash. Rev. Code § § 25.15.005 to .902).
The Washington B&O tax, based on gross receipts (a tax of .138% to 3.3% of gross income), is imposed on all businesses operating in the state, regardless of the form the business takes. Thus the state of Washington taxes LLCs as partnerships though you are correct that there is no state personal income tax. Oregon has no entity level tax, again Washington does tax the LLC. I am not sure if you are a corporation or a DE LLC. My guess is a DE.
If your a corporation, the rule is any corporation with substantial nexus in Oregon, and not protected by Pub.L. 86-272, must pay Oregon excise or income taxes (Oregon Administrative Rule 150-317.010, Substantial Nexus Guidelines. ORS 316.027). Nexus means a connection, tie, or link.
If on the other hand you are a DE, then Oregon taxes residents on all sources of income and nonresidents on income earned from Oregon sources.
A Oregon resident is someone who is domiciled in Oregon. "Domicile" is a tax-law concept. It is the place you consider to be your home and where you plan to return after an absence. Intent is the deciding factor when you determine your domicile. The law assumes you have a domicile somewhere. It also assumes you have only one domicile.
An Oregon resident may also be someone who is not domiciled in Oregon, but: (1) maintains a residence in Oregon, and spends a total of more than 200 days in Oregon during the taxable year.
Hope this helps.
Dissolve your existing business in the state you are in, that will keep you from having to foreign file in the other state while your existing business still resides in the former state. All states have corporation divisions. Go to that division and get the requisites and costs so you can have a smooth transition. Make sure you file the proper address and state change with IRS as well. It's very easy to do and honestly cheaper if you do it yourself. If you get stuck, hire a business management firm or a CPA to help you.
Talk to a good business lawyer in the state of Washington.
As for taxes, you will file two state returns: One in Oregon for revenues and expenses incurred WHILE YOU WERE THERE, and one for Washington for revenues and expenses incurred. Beyond that, talk to a good tax CPA in Washington. Estimateds are based on where you live at the time.
Hmmm... Unless you have elected to be treated as a corporation, your LLC is a flow through enitity so you will pay tax on your individual return.
Washington State does have a Business and Occupation tax so make sure you take that into consideration before you move. Here is a link
Your LLC can be registered in any state. The registration fee you pay will not change for that whether you move or not.
And yes, you will need to pay income taxes in any state that you have done business. You will likely use a 3 factor apportionment factor. You should speak with your tax preparer. Good Luck!!
Moving a LLC from one state to another is not involved in most states. You will have two states returns in the year you choose to move t: ne in the state your in and another generally in the state you will be moving to. Most states have a proration process for the assessment of the state's taxes and in some cases can mean at the very least (or most) a minimum amount due: franchise tax, generally, for pass-through entities, generally.
Legally, you will need to establish the right to "doing business", for example, in Washington, and in most states there are some fees to establish the firm as such. This is not to be confused with establishing a state tax account there..but, instead, legal qualification. I think you may also have to close the firm for the same reason with Oregon. If you don't Oregon will look for its annual filing fees, etc. and if fail to "qualify" your LLC in Washington, you will not having legal standing to start a "suit", for example, there if the need arose.
Check with your attorney who drafted your LLC documents or at the very least the Oregon and Washington Secretary of State offices.
The issue of where to file state estimated tax payments involves following as you outlined briefly the flow of income, but in some cases can be tied more appropriately to the "apportionment of income" regulations and based upon such things as the "source" of the income or "where the work is actually performed'.
This generally applies to the income and can also affect an allocation of your franchise tax base between the states in circumstances where the LLC operates in multiple sates or , as in case, has moved. But in many cases, each tax is calculated under different regs depending upon the state's laws.
The best thing to do is just register the existing LLC in Washington state first, and make sure you have an address to register that LLC at in Washington. Make sure to indicate that Washington is the LLC's home state. Then cancel the LLC's registration in Oregon. Assuming this is a disregarded LLC, you shouldn't need to obtain any kind of tax clearance for the LLC, just pay any outstanding fees to the Secretary of State, i.e. annual report fee, etc. I would pay the 2nd quarter taxes to Oregon since we are already well into the second quarter.
Finally, if your LLC still regularly does business in Oregon, you won't save on taxes simply by re-registering it in Washington. If you derive income from the state of Oregon, you need to pay taxes in the state. If you continue to do business in the state, you still need to be registered there, as a foreign LLC if you want to make Washington the LLC's home state.
You should really speak with an attorney for this. Yes, you can dissolve your Oregon LLC and create a Washington one - moving your charter, but different states have different requirements and you want to make sure you have all of the correct information.