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Dimitry K., Esq.
Dimitry K., Esq., Attorney
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Experience:  Run my own successful business/contract law practice.
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I am in the process of relocating from California to North

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I am in the process of relocating from California to North Carolina for my wife's career. I am the majority owner of an S-Corporation in CA (my wife own's a minority share, granted to her when she was working for the company). I want to move the company as a legal entity from CA to NC, and I'm not sure the best way to do so (I'm also open to changing to an LLC if that makes sense for tax purposes, and my wife is also willing to give up her share of ownership if there's any reason to do so).

I understand that there are several options, but I'm not sure of the implications of each (both in terms of cost and paperwork to process, and in terms of any tax implications):

1. Form a new company in NC, and dissolve the company in CA. (I'm guessing this has the most paperwork associated with it, and probably fees too? And would require a new EIN, etc.?)

2. File a conversion in NC (I'm not sure I know what I'd need for this - it appears a simple filing of my Articles of Incorporation from CA with a form to the SoC of NC and a small fee? - can it really be that simple?) and then dissolve the company in CA.

3. File as a foreign corporation in NC, and then suspend operations in CA (this made more sense when we were considering that we might return to CA in a couple of years - that's no longer so certain).

My guess is that #2 is the most straightforward... is that correct? What would I need to do with respect to existing banking and accounting for the CA company? Could I transfer the small balance of cash from a bank in CA to NC - or is it more complicated? (I'm sure I'd have to file a 'final' return with the state of CA, but I don't know if that means I also need to start all my accounting and banking 'from scratch' in NC.)

Phew - the questions started piling up once I started typing!

Thanks,
Scott
Submitted: 10 months ago.
Category: Business Law
Expert:  Dimitry K., Esq. replied 10 months ago.

Thank you for your questions, Scott. I will be happy to attempt to assist you with this relocation.

 

You are correct that the first option is the most complicated. It involved a transfer from an old entity to a new entity, a new EIN, and far more paperwork and complexity then you really need to pursue especially if you are not trying to change anything fundamentally but where the entity is going to be domesticated. The 2nd option is indeed the most straightforward. You would need to file for incorporation and for reserving your name within the state. NC does permit for S-Corps so you really do not need to refile unless you wish to do so. Then just file articles of dissolution in California, make sure to pay all fees and taxes if any, and you are free to conduct business in the new state. An S-Corp conversion makes sense if you expect to sell or transfer your business at some point or expect your profits to go above $300,000--otherwise an S-Corp generally has more favorable tax implications.

 

Hope that helps.

Customer: replied 10 months ago.

Thank you, Dimitry.


 


The form that the SoC of NC sent me was simply:





 


ARTICLES OF INCORPORATION INCLUDING ARTICLES OF CONVERSION


(Form B-01A)



...but without any explanation.



You mention I need to file for incorporation in NC and for reserving the company name - do I need to do this before filing this conversion form? At the same time? Or does this form cover it all, in effect?



Part 2 of that -- if I complete this form, is my company (the "converting business entity") classified as a "foreign corporation"? I'm assuming yes, since the other options listed are all LLC variants.



Thanks,


Scott




Expert:  Dimitry K., Esq. replied 10 months ago.

Scott,

 

Thank you for your follow-up. You generally have to reserve your name before you file for incorporation. Do a business entity check to make sure that the name you wish to take on is available. In terms of this form, the company is considered foreign until the conversion takes place--the conversion is a domestication from one state to another. Once you convert your entity to NC, and dissolve the California entity, you can file articles of amendment and domesticate your entity, and in process it turn into domestic rather than a foreign entity.

 

Hope that helps!

Dimitry K., Esq., Attorney
Category: Business Law
Satisfied Customers: 37882
Experience: Run my own successful business/contract law practice.
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