Is transferring an LLC from Texas to Colorado, possible?

Question

Greetings colleagues,

Last year, I created an LLC in Austin, Texas. I never really got anything off the ground there with it, because I had a bunch of "fires" to put out personally and professionally. Fast forward one year. The LLC is still there doing nothing, but I now live in Colorado after some changes brought me North.

My question is, is it possible to transfer an existing LLC out of the state of Texas and into the state of Colorado, or would I have to dissolve everything and start all over? After some thought about it, I feel if there's going to be any hang up with it, it would be at the TX Sec. of State's office and/or the local/county tax office. Any thought, opinions, or advice would be greatly appreciated.

All the best to your success in 2017,

Lyle

Account Closed · Answer

you would have to open a new llc in colorado,but you can easily keep the same name if available.If you have no activity in your llc it is probably on a small fee to close it

Steven Thrasher · Answer

Yes, you can convert a TX entity into a CO entity. It is called a "conversion" and accomplished with a "Certificate of Conversion."

State laws differ on how to do a conversion.  My experience is moving a CO LLC to TX, and my understanding (verify this!) is that it's similar in the other direction. Generally, to be eligible for conversion, BOTH states much have entity Conversion statutes (and yes, CO and TX do). I'll skip why or why not to do it, other than to say if you have contracts and assets in the existing entity, then transferring those contracts and assets to a NEW entity is potentially taxable (so a Conversion is preferred).  If you have no assets or contracts, then creating a new entity in the new home state (which you have to do as part of the Conversion process anyway) is a less expensive move.  Operating a foreign entity creates complex (ie, expensive) accounting, and inconsistent tax treatments -- so that's another reason to move the entity.

Specifically, moving the entity involves several steps in moving from CO to TX, namely From the Secretary of State of Texas website:

1. EitherA. Plan attached to certificate of conversion.Plan includes certificate of formation for converted (Texas) entity.Plan complies with BOC § 10.103.ORB. Certificate of conversion includes information below and certificate of formation is attached.the name, organizational form, and jurisdiction of formation of the converting entity.the name, organizational form, and jurisdiction of formation (Texas) of the converted entity.statement that a signed plan of conversion is on file at the principal place of business of the converting entity, and the address of the principal place of business.statement that a signed plan of conversion will be on file after the conversion at the principal place of business of the converted entity, and the address of the principal place of business.statement that a copy of the plan of conversion will be on written request furnished without cost by the converting entity before the conversion or by the converted entity after the conversion to any owner or member of the converting entity or the converted entity.2. Certificate of formation for converted (Texas) entity includes statement that the entity is formed under a plan of conversion and the name, address, date of formation, prior form of organization, and jurisdiction of formation of the converting entity in accordance with BOC § 3.005(7).  (Statement must be added if using secretary of state form for certificate of formation.)3. Certificate of conversion signed on behalf of the converting entity.4. Certificate of conversion includes statement that plan of conversion has been approved as required by the laws of the jurisdiction of formation and the converting entity’s governing documents.5. Tax clearance or statement that converted entity is liable for payment of franchise taxes.6. Texas secretary of state file number for converting entity, if any.7. Fees for both the certificate of conversion and the certificate of formation.8. Two copies of all documents for submission to secretary of state (optional, for return of file stamped copy).All the best, Steven Thrasher, Thrasher Associates, LLC (trademarks, copyrights, patents, licensing and due diligence)www.thrasherassociates.com

Lyle McCartee · Answer

Thanks for the insight Fred. I recall Austin having a pretty high sales tax and even the hotel tax in the Austin area was pretty high to compensate for the lack of state income taxes. At one point a few years ago, Austin City Council started requiring homeowners to have a permit (for their own homes) to rent out their houses whenever SXSW or ACL music fest would come to town. That was brought on by the hotel lobby in Austin, because they were upset that homeowners were raking in huge profits and it was all untaxed, whereas the hotels were being charge about 15% (I think) tax per room!!

I'm thrilled that you and the other professionals are up here on these forums with a treasure chest of knowledge and experience. Thanks again for your thoughts and insight!

Fred Heller · Answer

@Lyle McCartee  We don't have an income tax in Texas but we do have a business tax, which is called a franchise tax. All companies doing business in Texas are subject to the franchise tax.

BUT, and I'll preface this by saying I haven't checked the rates lately, the first $1.8 Million is exempt. Then it's .05% up to $10Million and 1% over $10Million. There are different rates for grocery and retail. Unfortunately for me, I've never made enough money to pay taxes :(.

The one important thing to remember is you have to file a tax report every year by May 15. If you fail to do so your right to conduct business will be suspended. If no taxes are due, you file a "no taxes due" form, which is one page long and takes about 5 minutes to fill out.

BTW, the Texas Comptroller of Public Accounts handles this tax. They send notifications in January. If you don't get yours, you should contact the Comptroller's office.You also have to file a yearly public information report. This report lists the officers of the corporation. Contact the Comptroller's office for information on that.

Lyle McCartee · Answer

Thank you so much councilor!

Drew Fein · Answer

@Daniel Hyman, thanks for the shout out!  @Lyle McCartee, I would be happy to speak with you about this.  As far as I know, there is no process in Colorado to domesticate (i.e., transfer) an LLC to Colorado; however, there are other options such as registering with Colorado as a foreign entity or forming a new LLC.  Feel free to reach out to discuss options.  Of course, you will want to speak with a tax professional like @Daniel Hyman as well regarding the tax implications.

Lyle McCartee · Answer

Thanks for all the insight everyone. Looks like I have options. Options are a good thing!

Have a great weekend.

Daniel Hyman · Answer

@Lyle McCartee You might want to be in touch with @Drew Fein. She is originally from Texas and now practices law in Colorado.

Jessica Zolotorofe · Answer

@Lyle McCartee, There is a man named David Bass that knows corporate entities inside and out. He can definitely help you out. His company is called United Corporate. Inbox me for contact info, if you'd like. I'm not sure I can put it on here without them removing my post!

Chuong Pham · Answer

You can transfer LLC from state to another state. My business partner move our business from LA to Texas. You might be able to find a business lawyer to help you with that or just research it and do it yourself.