LLC to Shining Sea
October 13, 2015 10:46 AM Subscribe
How do I properly quit business operations in one state after moving to another state. Complication: I have outstanding invoices.
I have a single-member (me) LLC in Illinois, and will be moving to a new state. I am owed $X in outstanding invoices. I will not be continuing this business' activities in new state, but I will (hopefully) be slowly collecting this outstanding money.
Do I need to domesticate (?) this LLC to the new state (it seems to have the mechanism for doing so), or do I keep it in Illinois?
Can I dissolve it and simply continue collecting the money as usual as long as I am doing no new business?
Is this new state income or Illinois income for the purpose of taxes?
This may be a problem for a professional, and if so, that's fine, but if you have any idea how this type of thing has worked for you or others in the past, that would be lovely to hear. I understand you're a random person on the internet and despite your numerous qualifications or lack thereof, you are not providing any professional advice in any capacity.
Thanks!
I have a single-member (me) LLC in Illinois, and will be moving to a new state. I am owed $X in outstanding invoices. I will not be continuing this business' activities in new state, but I will (hopefully) be slowly collecting this outstanding money.
Do I need to domesticate (?) this LLC to the new state (it seems to have the mechanism for doing so), or do I keep it in Illinois?
Can I dissolve it and simply continue collecting the money as usual as long as I am doing no new business?
Is this new state income or Illinois income for the purpose of taxes?
This may be a problem for a professional, and if so, that's fine, but if you have any idea how this type of thing has worked for you or others in the past, that would be lovely to hear. I understand you're a random person on the internet and despite your numerous qualifications or lack thereof, you are not providing any professional advice in any capacity.
Thanks!
There's usually a mechanism to register a foreign LLC, which in this case means "out of state", not "overseas". It can result in you having to pay fees and sometimes taxes in both states, but without knowing where you're moving or generally being familiar with Illinois, it's hard for me to say more. All that said, just how "slowly" is slow? Like within the next year? Or within the next twenty years? If you're really just collecting outstanding receivables, I don't think that's within the realm usually considered "doing business in the state" and you're probably fine, but if it was going to take several years then this might be more of a thing. But when you do something like this with a business, both the winding-up and the moving, you should be really having a CPA look at the tax stuff. Multi-state tax is the stuff that makes even longtime tax preparers tear their hair out.
posted by Sequence at 11:51 AM on October 13, 2015
posted by Sequence at 11:51 AM on October 13, 2015
I'll start with - you're gonna need a CPA...
In my state (Alabama), setting up and maintaining an LLC isn't extremely costly on a year-by-year basis, so the mechanics of it would be to simply maintain the old state LLC by filing privilege tax, etc. as long as it takes to collect those invoices.
Things that should be able to wind down by the end of the year, say:
- employment taxes - assuming you had any employees, which you apparently don't, once they're relocated or no longer with you that can be discontinued.
- sales taxes - no new sales in old state, no new sales taxes to collect
- depending on your accounting method, you may have to recognize the income in the old state as it's collected. You'll definitely need a CPA to help you sort that.
However, you must tie the ribbons on these returns and reports. You may need to send in info returns that have zero sales on them, for instance. And all states will require that you formally dissolve the old business - don't just stop filing returns!
I really wonder (and a CPA would definitely need to sort this out) whether your new business couldn't simply take on the receivables of the old business. This way, the debts would be owed to the new business. Just send a letter and new invoice to customers that still owed you money saying that they now owed the new business.
TL:DR: you need a CPA to help you with this transition. But I do know that keeping a business standing up that isn't selling much or anything isn't very costly.
posted by randomkeystrike at 1:25 PM on October 13, 2015
In my state (Alabama), setting up and maintaining an LLC isn't extremely costly on a year-by-year basis, so the mechanics of it would be to simply maintain the old state LLC by filing privilege tax, etc. as long as it takes to collect those invoices.
Things that should be able to wind down by the end of the year, say:
- employment taxes - assuming you had any employees, which you apparently don't, once they're relocated or no longer with you that can be discontinued.
- sales taxes - no new sales in old state, no new sales taxes to collect
- depending on your accounting method, you may have to recognize the income in the old state as it's collected. You'll definitely need a CPA to help you sort that.
However, you must tie the ribbons on these returns and reports. You may need to send in info returns that have zero sales on them, for instance. And all states will require that you formally dissolve the old business - don't just stop filing returns!
I really wonder (and a CPA would definitely need to sort this out) whether your new business couldn't simply take on the receivables of the old business. This way, the debts would be owed to the new business. Just send a letter and new invoice to customers that still owed you money saying that they now owed the new business.
TL:DR: you need a CPA to help you with this transition. But I do know that keeping a business standing up that isn't selling much or anything isn't very costly.
posted by randomkeystrike at 1:25 PM on October 13, 2015
I've researched this a bit, and my understanding is that if you did want to continue operations in the new state, the easiest thing to do is establish a new LLC in the new state and merge the old into the new via a non-taxable transfer.
Since you don't want to continue, I think the easiest thing is to do what randomkeystrike said and wind it down with the help of a CPA, after all of the invoices are in. It depends on the new state's laws, but I believe in most states just collecting invoices doesn't count as "doing business" so you won't have to change anything or register as a foreign entity.
posted by zrail at 5:10 PM on October 13, 2015
Since you don't want to continue, I think the easiest thing is to do what randomkeystrike said and wind it down with the help of a CPA, after all of the invoices are in. It depends on the new state's laws, but I believe in most states just collecting invoices doesn't count as "doing business" so you won't have to change anything or register as a foreign entity.
posted by zrail at 5:10 PM on October 13, 2015
This thread is closed to new comments.
posted by parmanparman at 11:02 AM on October 13, 2015