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CalAttorney2
CalAttorney2, Attorney
Category: Business Law
Satisfied Customers: 10237
Experience:  I am a businesses law attorney, with experience advising and representing owners and investors.
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I have an LLC business in operation. I want to move it to

Customer Question

I have an LLC business in operation.
I want to move it to Delaware. I'm looking at registering there and then dissolving the NY LLC.
I am also about to register a trademark.
How can be sure that all the goodwill and business status transfers across with the change?
Or will this be looked at as a brand new business from scratch?
I'm looking at using a document filing service to do this.
What documents will I need to have to prove that it's the same company just moving to another state and finishing business in NY?
Thanks any help appreciated.
Submitted: 1 year ago.
Category: Business Law
Expert:  CalAttorney2 replied 1 year ago.

Dear Customer,

You can register your NY LLC in DE as a "foreign entity" and continue using that business entity to conduct business.

Alternatively, you can create a brand new LLC in DE and start over with a new business entity.

(The choice is up to you, but you cannot "transfer" an LLC from one state to another).

You can use document filing services, they are inexpensive and generally fast, but please do note, they do not provide you with the equivalent service that you would expect from a law firm (a business lawyer can help make sure that your business documents actually reflect your business and your entity is set up to maximize the business format to your business needs, rather than just regurgitating the state corporate code, and they can help you better plan for things like taxes and protecting your name and goodwill (this usually doesn't require additional filing (in some industries it can help), but does require proper branding and business planning).

Customer: replied 1 year ago.

Thanks so much.

I don't want to use the foreign entity option.

So to clarify, it would be a brand new LLC with nothing to do with the old one?

I would have no way to show the trademark office that it was the same company in operation for 5 years using the name I'm wanting to trademark?

Thanks

Expert:  CalAttorney2 replied 1 year ago.

If you do not want to use the foreign entity option (I would suggest at least consulting with a local lawyer to discuss this, it is a very common business practice and usually fairly economical, there is a minor increase in cost, but it is almost trivial).

You can trademark your mark if you like (again, just because something is not necessary does not mean you cannot do it). However, protecting your trade name and goodwill has much more to do with the area in which you are conducting business than simply marking the name. (For example, if you go by the name "ABC Stovepipes" and you sell stovepipes in the greater NYC area, you can protect against competition from similar sounding names, or similar designs, etc. selling stovepipes in the greater NYC area - however, you couldn't protect against an "ABC Stovepipes" in Atlanta because you aren't doing business there - courts will not allow you to put a hold or a mark on a name across the country unless it is very unique and you are actively engaged in trade). If your current LLC stops conducting business, it is going to lose the ability to protect its goodwill, etc. You can try to "sell" or transfer this goodwill to a new company, but you would have a difficult time enforcing this with your new LLC (I'm not saying it couldn't be done, I am saying that your results are not guaranteed and it will be costly - assuming someone actually tries to use your name for their own business in the same industry in direct competition with you).

Customer: replied 1 year ago.

Thanks I can't stay in NY for legal issues of needing a licence for the type of business. So foreign entity is not an option.

The trademark is a seperate issues and I was about to register it but then realise I urgently need to remove the business from NY.

It's a web based business with no physical operations or officefronts etc.

Does that change anything?

Thanks

Expert:  CalAttorney2 replied 1 year ago.

It does change your area of influence (so if you were retaining the same business it would make it more effective to enforce your trade name across a broader scope or marketplace).

However, I still have concerns regarding enforcement. I would again recommend speaking with a local attorney. A good, methodical, structure of your transition may create a mechanism to help you transfer your trade name to a new company (or possibly set up your business as an LLC holding company or some other mechanism) to allow you to retain your trade name and enforce it against potential competitors. I do know how important tradenames can be (particularly online where name searches drive sales), so it is probably going to be well worth an hour or two of an attorney's time to discuss this. I would recommend retaining an attorney in DE (the state you wish to move your operations to.

Customer: replied 1 year ago.

Hi there. Have been doing more research.

You mentioned I couldn't transfer my company from NY to DE.

Can you let me know any problems that would arise from me doing a 'Domestication'

https://www.myusacorporation.com/domestication

Thanks

Expert:  CalAttorney2 replied 1 year ago.

If you plan on doing this, hire a DE lawyer to assist you, and make sure that either that same lawyer, or someone from their office is simultaneously licensed in NY. (I don't recommend using a non-attorney or online service to help you with this). Remember, a Corporation is an entity created under state law (in your case, NY), if you try to transfer your corporation (use "domestication") to transfer it to DE, you are in effect trying to tack a new entity from DE onto the existing NY entity, and simultaneously terminate the NY entity.

You have issues with remaining responsible for reporting requirements in NY (remember the entity still originated there, and moving it to DE does not terminate your obligations in NY - if this was the case corporations could evade regulatory and reporting issues by leapfrogging from one state to another - this is not the case), and you must ensure that your business is compliant in NY (you are trying to flee NY due to regulatory issues).

I have indicated in each of my answers above that you really should speak with local counsel, and there are many, many, reasons why. But trying to do a cheap domestication online is a sure way to create problems for yourself if you are already having regulatory concerns with the state of NY.

As a practical matter, "domestication" is not commonly used.

Customer: replied 1 year ago.

Thank you.

So if this LLC was a storefront bricks and mortar business, and I closed the shop to move and reopen in Delaware, I would still have compliance and reporting obligations in NY, even though I don't live there and don't have a business there anymore?

This is where I'm confused. It seems that it's impossible to ever leave NYC from what you're telling me.

Is this the case?

Initially you said I can't transfer a business from one state to another. So essentially I have to start a totally new and different business in DE?

Thanks

Expert:  CalAttorney2 replied 1 year ago.

Dear Customer,

My apologies, I overlooked that this is an LLC. Domestication works for Corps, not LLCs, so this doesn't leave the starting gate. (I was thrown off by the link you provided (which in itself states that this law applies to Corporations only)).

But yes, if this was a corp. you would still have to ensure your compliance is squared away in NY BEFORE moving to DE, and you will have to maintain an agent for service, etc. in NY even though you incorporate in DE, just as you would have to for any other NY Corp. that you were to wind down.

I don't think I have stated anything confusing (other than the link you provided confusing me on the type of entity you have), please review my first (original) post:

You can register your NY LLC in DE as a "foreign entity" and continue using that business entity to conduct business.

Alternatively, you can create a brand new LLC in DE and start over with a new business entity.

(The choice is up to you, but you cannot "transfer" an LLC from one state to another).

Customer: replied 1 year ago.

Thanks. What about this:

http://delcode.delaware.gov/title6/c018/sc02/




(a) Upon compliance with this section, any limited liability company may transfer to or domesticate or continue in any jurisdiction, other than any state, and, in connection therewith, may elect to continue its existence as a limited liability company in the State of Delaware.


(b) If the limited liability company agreement specifies the manner of authorizing a transfer or domestication or continuance described in subsection (a) of this section, the transfer or domestication or continuance shall be authorized as specified in the limited liability company agreement.


................



This would appear that you can.



This is my last question I promise... I just keep researching and finding that it's possible to transfer a domestic LLC.



What am I missing?



Thanks

Expert:  CalAttorney2 replied 1 year ago.

Dear Customer,

I have practiced business law for a fair number of years, and have yet to see a successful domestication (for either a corp. or an LLC). I have not shepardized your statute (reviewed the statute to see if there is any case law interpreting the statute to support domestication - keep in mind, the statute you cite is also the primary enabling statute for creating an LLC traditionally - so I am unsure whether there is any actual support for the use of this to transfer your company as a "domestication").

While I have not seen an LLC with a domestication, I have encountered corporations that have attempted this. The problem is that you cannot simply avoid the fact that the entity is a creation of state law, and you must ensure 2 things (1) that your business is in good standing (you appear to have some regulatory issues which are outstanding, I don't know what you are working with, but I would suggest working with a lawyer to help you sort these out before trying to wind down your current business - either with a traditional wind down, or a wind down and domestication); and, (2), you must continue to have someone act as an agent for the entity in the original state even after you wind it down (again, you started a business entity there under NY law, you cannot simply walk away from NY).

If you really do want to try a domestication (which I am skeptical of its success), please hire a local attorney. It may work out, but please do not do this without counsel (you may pay a little bit in fees, but doing it right the first time will save you a huge amount when compared to how much it will cost you to try to resolve it).

Here is the best summary on moving a company (LLC or Corp.) from one state to another. As you will see, the options I outlined initially are the ones provided here, and they are the ones that are utilized by most businesses: http://www.nolo.com/legal-encyclopedia/how-move-your-llc-another-state.html

Customer: replied 10 months ago.

Hello

I just wanted to update you that I successfully moved the LLC from NY to DE.

It's all been finalized and now no longer exists in NY and I have a DE 'certificate of conversion' from the state.

So it is possible.

Would this be the equivalent of transferring the company from NY to DE?

Thanks!