June 4, 2021
Moving Your Business to a Different State
One of the things that more and more people are exploring is moving from their current location to one in another state. The reasons for this can be varied and personal, anything from the affordability of housing and the availability of work to a desire to change your state of mind along with your home location.
What most people don't know (or know but can't navigate) is that there are a TON of things you need to do in order to change your state of residence in the eyes of tax authorities, and whether we're talking about your family or your business there are some things everyone should know and act upon when they are making this sort of move.
Probably the most basic thing on the list is to actually physically move yourself and your family to the new state. This doesn't mean you have to stop owning a residence in your old state but the new state should be your primary residence and you should spend more than half the year in the new state.
You should also not use your new state residence as a rental or Airbnb as it would make it unavailable to you if you needed to stay there. If you're not in the house leave it vacant or have a temporary house-sitter. Keep physical property in the new state; cars, equipment, furniture, etc. Shop local, or have Amazon and other online sellers ship to the new location.
Make it legal
Get a driver's license in your new state, register your vehicle with the state's department of licensing, get your professional licenses in that state. Register to vote! If you continue to bank with the same institution switch your branch to one near your new residence. Update your address with them to reflect the new location.
Change your mailing address everywhere you can
Netflix, Hulu, HBO, your airline miles, Google, alumni associations, travel loyalty programs, and Facebook. Everywhere someone looks online it should show your official address in your new home location. If you still get magazines then get them at your new location. Change the address your credit card bills are mailed to. File a change of address with the USPS.
Get a new doctor and dentist
This one will probably hurt the most if you're really attached to your health providers but it's a key indicator of where you reside and that your health providers are nearby.
Get involved in the local community
Get a gym membership, join a local community and/or business organization. Give to local charities.
Move your business
You don't necessarily have to close your S-Corp business in your previous state, in fact, many states may still require you to have a business presence in the original state, especially if you still have income that can be sourced to that state. But you should definitely get a business license registered in the new state and join a local chamber of commerce. Other than updating the address of the business with the IRS you can also use the same EIN your existing business has, just with a new license in a new state.
We at Formations generally do not recommend exposing yourself to taxes in multiple states because of the potential complications around tracking and reporting the right amount of income for taxation in each state. For instance, in Washington state, your income is taxed based on where the benefit of the income is received, so if you get paid by someone in California and do the work mostly in California then you can "source" that income to California, but this would also open you up to taxation in California and all the complications that come with (licensing, tax filing, FTB annual taxes, etc.)
If part of your income is investment-related then get some investments in the new state: rental properties, houses to flip, etc. And conduct your business in the new state: have meetings or events remotely in the new state or in person. If you have payroll then get the local employment accounts opened and added to your payroll.
Time is on your side
One of the greatest indicators of residency is time spent in the state: in fact, some states dictate how much tax you owe each year based on how much time you actually physically reside in the state. California is a big state for this sort of policy because of its expansive tax structures. Your income taxes in CA will go up or down depending on how much time you spend in the state. Won't matter much if you own property and have a bunch of stuff mailed to another state if you still spend most of your time in the original state each year.
Moving to another state is often a major decision with many factors both personal and business; it's recommended that you consult with your tax advisor in your current state but also in the new state as often tax professionals will focus on their own state's tax situations so consulting with a provider in the new state may give you a clearer understanding of the tax position you'll be moving into.
Luckily if you're a Formations customer you have a resource who will help you do this research and advise you along the way. Talk to your Customer Success Manager today.