Fleeing the California minimum wage increase, N. O. Smelz, owner of Smelz Carpet Cleaning calls his friend and fellow entrepreneur Billy Brazos to announce that he’s moving to Texas and to ask for any advice. Having just completed an end of year checkup on his own business, Brazos offers his top five tips for any company new to Texas, relocating within the state or that just hasn’t had a corporate checkup in a bit.
#1 Think About Your Company Entity
You have 3 options when moving your business:
- Continue – You can continue your company in the old state and register as a foreign entity doing business in the new state (undertake foreign qualification in the new state). However, there are a couple of things to note:
- Ongoing State Fees. If you keep both entities, you will pay duplicative annual report and/or franchise taxes, and sometimes complicated tax filings for the entity and its owners
- Delaware or Nevada. If you incorporated in Delaware or Nevada, you were probably foreign qualified in your current state. You can eliminate your current state and register as a foreign entity in your new state.
- Liquidate – You can liquidate your company in the old state and form a new entity in the new state.
- This may result in federal tax issues if you have a C corporation, but not likely if you have a limited liability company.
- For any company entity, there are state mandated formalities if you dissolve your business, depending upon the state, often at least requiring document preparation (dissolution papers), filing and paying any outstanding taxes and dissolution fees.
- Reorganization – You can undergo a reorganization, forming an entity in the new state and merging the old company into the new.
- This can be entirely tax-free for a C corporation.
#2 Don’t Forget About Your Legal Documents
- Contracts with Customers and Vendors – Obviously, your choice of law is now likely to be Texas, not California. It is also likely that Texas law will treat other contract provisions differently. Get a contract checkup.
- Employee Handbook – Even if you didn’t get your employee handbook off the internet, many aspects of the employment relationship are different in Texas from California. My partner Michael Kelsheimer offers free “Employer Handbook” with easy to understand Texas-specific answers to frequent employment questions.
#3 Update Your Address Change with the Government – Federal, State & Local Agencies
- The IRS requires no document change, like your employer ID number (EIN), but you must complete Form 8822-Change of Address (Part II) and designate if only changing mailing address or also changing notifications for business income, excise, employment, and other tax matters.
- The Texas Secretary of State requires company registration to do business in Texas perhaps necessitating amending organization documents (Articles of Incorporation for a corporation or Articles of Organization for a limited liability company) and notification of any address change. If you elect to be organized in one state and registered to do business in another, you must maintain registered agents in each state and complete each state’s filing and reporting requirements. California, for example, imposes a franchise tax on every corporation or LLC that is registered to do business there.
#4 Change Your Address Online
- Marketing Materials – You’ll want to update your website, email marketing templates, email signature, business cards and social media.
- Online – Make sure to your physical address on your website, Google Places, Yelp, Bing Places, Yahoo Local, Google Places, Google Map Maker tool, Bing Places, Yahoo Local, Mapquest, Apple Maps, OpenStreetMap tool, and any other search engines you’ve registered your business with.
- Automatic Payments – Any website that auto-charges your business credit card will not accept charges when your address changes at your credit card company or bank.
#5 Tips for Company Owners
- Wills and Estates
- Texas Driver’s License – You’ll want to update local address within 30 days of your move.
- Voter Registration –Whether you move into the state or into another Texas County, you should notify the county voter registrar.
- Texas Concealed Handgun License – If you move, you can change your address online.
- Insurance – Have you updated your insurance lately?
- Safety deposit box – Have you inventoried/ updated safety deposit documents lately?
- Personal Move List – This article gives you a pretty good start on a list of other personal items to be addressed in a move.
Tilting the Scales in Your Favor.
Whether your company is moving to Texas or just moving across the street, check out, among other things, your company structure, your contracts with your customers and your vendors, your internet presence and the last time you told your current and prospective customers and vendors who you are, where you are and what you do.