How to Move a Business to Another State

A business owner may relocate a business to another state for a variety of reasons, including increased real estate costs, property taxes, business taxes, or business regulations in the old location; changes in the target market; or even personal or family reasons. Relocating your residence from one state to another requires that you complete several tasks, such as changing your mailing address, utilities, insurance policies, and possibly banks. Moving a business is much more complicated, and it may be difficult to determine what to do first. The steps needed for a successful move vary depending on your business structure. 

Sole Proprietorships

One of the main advantages of forming a business as a sole proprietorship is that you do not have to comply with the formalities and requirements necessary for most other business structures. What you need to do to move your business will depend on the requirements of both your old state and the new state; however, there are certain steps you must always take. First, notify your clients and vendors about the move. Depending on the terms of your contracts, you may be required to provide a certain number of days’ notice. In the absence of any contractual notice requirements, a conservative approach of providing three months’ notice will allow your vendors and clients to prepare and accommodate the new location. If you will no longer be working with certain clients or vendors, thank them for the relationship and stay in touch. 

Next, pay any state, local, or employment taxes and close your business accounts. Make sure you follow any state-specific steps to wrap up any obligations in the old state and then register in the new state. If licenses are required, terminate existing licenses and obtain new ones in the new state. Do the same with professional liability and commercial insurance.

Third, if you are using a “doing business as” (DBA) name, terminate the old name and apply for a new name in the county (or counties) where you will be doing business. Depending on the state, you may need to register the DBA name with the secretary of state’s office or the county clerk. Some states do not require you to register if you are a sole proprietor, so it is important to check the destination state’s requirements. States often have a website providing this information. 

Fourth, if necessary, close your business bank accounts and establish a relationship with a local banker to set up new accounts. Transfer the money from the old to the new accounts. Change your mailing address with the United States Postal Service and notify the Internal Revenue Service so it will send correspondence relating to your business’ taxpayer identification number to the new address. 

Finally, make sure that a final tax return is filed in the old state for time spent there that year. This means that two state tax returns will need to be filed for the year of the move—one in each state.

Partnerships

Moving a partnership requires most of the same steps listed above. However, a partnership has more than one owner, so the other partner or partners should ensure that any accounts in their name are terminated and new ones are established in the new state. Some states require partnerships to register, so it is important to ascertain the requirements of the new state. The partnership agreement should be reviewed and rewritten if necessary to address the business’s purpose and the partners’ obligations, and to comply with the laws of the new state.

Limited Liability Companies

If you are relocating a limited liability company (LLC) to another state, there are even more steps required in addition to those outlined above. First, if the members decide to continue doing business in the old state, they should consider whether they want to (1) create a new LLC in the new state and dissolve the old LLC or merge the old LLC into it or (2) continue the LLC in the old state and register or qualify the LLC as a foreign LLC in the new state. If the business is more personal and local in nature (for example, a fitness coaching business), it may make sense to terminate the old LLC and create a new LLC in the new state, since the eventual client base is likely to be located in the new state. If you will be terminating the old LLC, file the proper termination documents with the old state and follow and document the procedures outlined in your old operating agreement for unwinding the company. If you choose to merge the old LLC into a new one in the new state, you must comply with the merging procedures set forth in the law of the old state. Review and revise the operating agreement to the extent necessary to comply with the new state’s requirements. 

Corporations

The steps necessary to move a corporation to a new state are often the same steps needed for a sole proprietorship, with some additional requirements. First, look carefully at the requirements of the new state for incorporating the business in that state. Decide if you will continue to do business in the old state or only transact business in the new state. If you transact business in the new state and the old state, you may need to register or qualify your business in the new state. If you will no longer transact business in the old state, you should file dissolution or termination documents in the old state and incorporate domestically in the new state to create a new corporate entity. If you will be dissolving the existing corporation, be sure to follow and document the procedures outlined in your old bylaws for unwinding the corporation. Review the bylaws and revise them to the extent necessary to satisfy the new state’s requirements. 

We Are Here to Help

Moving a business to another state involves several decisions and steps, so the best advice is to seek help from certified public accountants (CPAs) and business lawyers. Ideally, you should contact CPAs in both the new state and in the old state to make sure you have complied with all of the federal, state, and local tax requirements. Work with a lawyer in the old state to properly unwind the business (or transition it to the new state if desired). Contact a business lawyer in the new state to help you decide which entity is best for your business and complete all of the steps necessary under that state’s law to legally establish the business. The tax advisors and business lawyers will apprise you of traps to avoid and steps to take to ensure the move is as smooth as possible.

Contact us today to set up an appointment so we can help you successfully move your business to your new location.

Attention Blockchain and Cryptocurrency Miners: Wyoming is now open for business!

On Tuesday April 2, 2019, Wyoming Governor Mark Gordon signed The Special Electric Utility Agreement (HB113) into law. The National Law Review proclaimed it a ‘sweeping’ new piece of legislation. But what does it really mean?

It means that Wyoming is poised to become the cryptocurrency and blockchain capital of the nation – and this new law is paving the way!

The Costs of Blockchain and Cryptocurrency

Blockchain and cryptocurrency providers have long struggled with the excessive electricity and other energy costs associated with the complex process of mining. It’s been estimated that Bitcoin alone uses as much energy annually as the entire nation of Nigeria!

Given that Wyoming already produces some of the cheapest and most abundant energy in the nation, it’s always been an ideal location for finding possible solutions to blockchain energy consumption, and the associated costs. Wanting to capitalize on this advantage, Wyoming has made noticeable efforts to grow their technology sector and make it as blockchain friendly as possible.

As a result, several blockchain and cryptocurrency mining companies have already set their sights on making Wyoming home. The main challenge for Wyoming, however, was offering sustainable and affordable energy rates to blockchain miners without having a negative impact on their other customers.

HB113 aims to solve that all that.

How HB113 Works

The Special Electric Utility Agreement law allows cryptocurrency miners to enter into service agreements with Wyoming’s electric utilities that are separate from all other customers, and without approval from Wyoming’s Public Utility Commission. All costs and benefits from the agreements will sit squarely on the shoulders of the utility companies’ shareholders.

In other words, Wyoming’s utility providers will now have the flexibility to offer special rates and customizable solutions to blockchain and cryptocurrency miners without burdening their other customers with any losses or costs as a result.

This is a win-win for everyone involved.

Wyoming Leads the Way

HB113 is far from being Wyoming’s only piece of legislation to focus on the blockchain industry.

In 2018, Wyoming passed its first set of innovative blockchain laws that made the state’s LLC regulations blockchain-friendly, and categorized cryptocurrency’s as an asset which means they’re now exempt from state property taxes. This caused a slew of blockchain and crypto companies to register in the state. That first round of legal reform was one of the most exciting things to happen to cryptocurrency in at least a decade.

Now, with the passage of HB113, Wyoming has firmly established itself as the most blockchain friendly jurisdiction in the U.S. But they haven’t stopped there.

So far this year, seven other pieces of blockchain friendly legislation have been introduced in the Wyoming state legislator. To date, they’ve all passed on their floors and are set to be signed into law.

Aside from high energy costs, banking for cryptocurrency and blockchain companies has been another source of concern and frustration. Several of Wyoming’s new laws address those challenges. HB74, for example, would allow ‘special purpose depository institutions’ to perform most traditional banking functions for blockchain customers. And SF125 would be the only law in the nation to offer comprehensive UCC provisions for digital assets such as cryptocurrency.

How McDonough Law Can Help

Wyoming may be cowboy country, but their innovative and groundbreaking legislation in the last two years has set the stage for the blockchain community to firmly plant their roots in the Yellowstone state.

Blockchain companies looking to make Wyoming home should take careful note of the various new laws, particularly HB113, and weigh their options and opportunities. Our Wyoming utility attorneys have an in-depth understanding of utility and energy laws and years of experience representing clients during negotiations and the drafting of agreements. We can help you make sense of the new regulations and make the most of the many opportunities available under Wyoming’s broad and sweeping blockchain laws and reform.

Call our office to schedule an appointment today.

How to Talk to Mom and Dad about Creating an Estate Plan

Conversations about death and dying are rarely fun. Most people avoid them because they invoke feelings about our inevitable demise. Broaching this subject can be particularly difficult for parents and their adult children. Adult children may avoid bringing up the topic because they do not want to think about their parents’ mortality, and they may also want to avoid sounding as though they are waiting for their parents to die.

Despite these valid challenges to having conversations about death and dying, you should not avoid the topic. Your parents will die at some point, and having a plan to care for their money and property when they pass away will preserve their legacy and help them care for those they love most. Having this difficult conversation will also ensure that your parents have a voice regarding their end of life or when they can no longer make financial or medical decisions for themselves. Due to advancements in technology, these conversations are increasingly important because more people are likely to experience a time when they are still alive but unable to make decisions for themselves. In the absence of conversations about these scenarios and a legal delegation of decision-making authority, state law governs what happens. Those default rules may not reflect your parents’ wishes. In addition, failure to have your parents’ wishes properly documented may result in their heirs having to engage in expensive and time-consuming court processes.

Once you understand the consequences of not having those conversations, the next question is how do you raise the issue with your parents? There are a number of different approaches, though no particular one is necessarily better than any other. The following are some key ideas to keep in mind if you want to have this conversation with your parents.

● Do not nag. If you are trying to persuade your parents to talk about completing an estate plan, the last thing you want is to make the process and yourself an annoyance. Instead of engaging in a productive conversation, you may inadvertently create an atmosphere where your parents start avoiding you or become suspicious of your motives. If your parents hesitate to have these conversations, explore ways to bring up the topic without leaving them with their guards up.

● Be open and honest about your concerns. Being truthful about your worries is a significant challenge when discussing what will happen to your parents when they die or if they lose the ability to make decisions for themselves. Every family is imperfect, and oftentimes, areas of concern indicate delicate family situations. To facilitate the best conversations about estate planning and to achieve effective planning for your parents and their legacy, you must address the awkward family issues. You must ask the difficult questions now, when your parents are available to provide their insights.

Also, it is essential to have all the necessary parties, such as siblings, stepchildren, new spouses, and former spouses, involved. As your parents embark on these conversations, let them know that you support them. Prioritize understanding their wishes and helping them to protect those desires.

Ensuring that all the parties involved are in generally good health is another consideration. Having these conversations after someone’s health is compromised may result in decisions that are not considered objectively. In those situations, attempts to think deeply about a plan for what happens to your parents, their property, and their legacy, may be blurred by concerns regarding their health.

● Ask your parents what their wishes are. Find out what your parents want and hope for with regard to estate planning. Do not make assumptions. Be direct and ask them what their ideal situation is. What they say may surprise you. Even if you have had no previous conversations of this nature with them, that does not mean they lack a clear idea of how they see things occurring in the future. The problem is that they may not have the plans in place to realize their vision. Asking them about what they want brings them one step closer to making their vision a reality.

● Discuss the planning already in place. In many cases, parents do some estate planning when they start their family and never update it. Therefore, your parents may have some documents about what should happen if they can no longer make decisions for themselves or if they die, but the documents are no longer relevant because they do not address the changes that have occurred in the family over time. As a result, asking them about what they have done in the past is a critical component of having an effective conversation with your parents. Specifically, ask your parents if they have any of the following documents—and if they do, the documents should be reviewed
○ past wills
○ past trust documents
○ powers of attorney
○ HIPAA authorization forms
○ insurance policy and retirement plan beneficiary designations

● Include benefits to their children and grandchildren. Finally, addressing how your parents will build their legacy through their children (you and your siblings) and grandchildren is critical. A common sentiment among grandparents is that grandchildren are their reward for not letting their children drive them crazy, so they often have a significant desire to provide special allocations for their grandchildren. The form and method require serious consideration, given the unique dynamics between children and grandchildren. Explore how your parents want their money and property distributed and whether your childless siblings will receive less. Again, navigating this area requires great tact and wisdom.

If you approach your parents about end-of-life planning and you can all have clear conversations about the topics addressed above, you will be establishing the right foundation for effective estate planning.

You Do Not Have to Do This Alone
If you feel overwhelmed by the steps discussed above and you would like a neutral party to help facilitate the conversation and provide guidance regarding how the estate planning system works, our lawyers are available to help. Call our office to schedule a virtual meeting with us to begin the process.

Can (and Should) My Business Mandate the COVID-19 Vaccine for Employees?

Just a year ago, businesses across the United States shuttered temporarily in response to the novel coronavirus. Some of these businesses could not weather the virus storm and closed for good. Now that COVID-19 vaccines are available, many businesses are wrestling with deciding when to resume in-person operations and bring their staff back full-time. At the time of writing, 1.5 million doses of the vaccine are being administered across the United States each day according to the Centers for Disease Control and Prevention. Along with trying to adapt their businesses to the next new normal—one that includes a vaccine for this deadly virus—employers and workers alike are trying to figure out whether employers can (and should) require the COVID-19 vaccine for employees.

In the absence of a contract specifying otherwise, employment is generally considered to be at will. At-will employment means that the employer can terminate an employee at any time and for any reason, except an illegal one, without incurring any legal liability. Similarly, an employee can leave a job for any reason at any time without legal backlash. Accordingly, employers have the ability (with some limitations) to establish health and safety policies for the workplace, and they can generally terminate employees who do not comply without the risk of liability. However, many have questioned how this general rule applies to an employer’s vaccine mandate.

In December, the Equal Employment Opportunity Commission (EEOC) indicated that employers would be allowed to encourage or require their employees to receive the COVID-19 vaccine. According to the EEOC, “[i]f a vaccine is administered to an employee by an employer for protection against contracting COVID-19, the employer is not seeking information about an employee’s impairments or current health status and, therefore, it is not a medical examination.”

Nevertheless, if employers opt to mandate the vaccine, they must comply with current workplace regulations, including the Americans with Disabilities Act (ADA) and Title VII of the Civil Rights Act of 1964 (Title VII). Generally speaking, at both the federal and state level, employers must reasonably accommodate employees with certain disabilities or religious beliefs that preclude them from receiving the vaccine. If an employee has a medical condition that makes it unsafe for the employee to be vaccinated (for example, Guillain-Barre Syndrome), requiring the vaccine could give rise to a claim under the ADA. Also, anyone with a religious objection to the vaccine may be protected under Title VII.

Accommodations for employees falling under the ADA or Title VII could include remote work, additional personal protective equipment, or working in an area or location that does not require interactions with other employees or clients. As long as the employer can reduce or eliminate the threat of harm to the employee or others through these accommodations, the employer cannot fire the employee and must offer an accommodation.

Some experts say that it may be better to simply encourage rather than mandate the vaccine. Although businesses could be subject to lawsuits by employees and customers who claim that they contracted the virus at the business, mandating the vaccination could have similar repercussions, especially if employees experience side effects or complications from the vaccine that could be considered an injury.

Normally, vaccines are developed over the course of years, not months, and many people are worried about the unusually short period of time for scientific research before this vaccine became available. The type of industry and workplace should also be considered in determining whether to require the vaccine. In the healthcare industry, it may make sense to require the vaccine because healthcare workers are on the front lines as they care for the public. For example, it is common to require healthcare workers to get an annual flu shot. Some argue that the farming and food production industries should also require employees to receive the vaccination. Others advocate for vaccinating grocery store and retail workers. Some employers have begun to make preparations so that they can provide the vaccine to workers who want it.

The bottom line is that even if you can require employees to get the vaccine, you should first weigh competing factors before implementing such mandates. It may make sense to adopt a wait-and-see approach: As the vaccine becomes more readily available, are employees getting it of their own accord? Are you at risk of losing valuable employees if you require a vaccine? It is prudent for business owners to understand the culture of their employees (and customers) and to educate staff about the vaccine. As a business owner, you have worked hard to get your business to where it is today and have made it through a pandemic.

Call us today to set up an appointment: we can advise you about the pros and cons applicable to your particular business so you can implement the best policies for your unique circumstances.

Selling Your Small Business: What You Should Know

Determining whether to start a business is a major life decision. For small business owners, deciding when and how to sell the business is arguably even more consequential. Before selling a business, the owner is likely to spend many hours and even days worrying and considering the options: Is the market right? What price should I set for my business, and is that value the “right” value? How do I get started? While these maybe some of the most significant issues facing a small business owner who wants to exit, there are many factors that should be considered before putting up the proverbial for sale sign.

● The why. Thinking about selling your business—and exchanging the long hours and stress for a financial return—can be exciting. However, do you have a plan for what you will do once the business is sold? Will you retire or start a new business? Are you interested in staying on as a consultant for the new owner or even as an employee? You should reflect on your personal “why,” not only for yourself, but also because prospective buyers will want to know why you are selling. Some common reasons for selling include retirement, illness (or death), disputes among multiple owners, or a desire for a life change. Make sure you understand why you want to sell your business before you take too many steps forward. You do not want to realize too late that the one thing you are most passionate about is no longer yours.

● The when. Choosing when to sell is another major decision. Ideally, a business owner will begin to make preparations for the sale of a business as early as possible. However, at least a year ahead of time. Having ample time to prepare will allow the owner to improve the business’s financial structure and internal processes. It gives the business owner more time to take steps to increase the business’s attractiveness to buyers and therefore increase the sales price. In addition, every business owner should have a written business succession plan that specifies who will take over day-to-day operations in the event of certain triggering events, such as death or disability.

● How much. Determining the business’s value can be very difficult. The valuation should take into account the business’s goodwill, intellectual property, cash flow, customer base, and financial statements. If you have an operating agreement in place for the business, the agreement might specify the method of calculation for the valuation or how a valuation is to be made. In either case, obtaining the assistance of a qualified business appraiser is time and money well spent. Similar to an appraiser for a residential property prior to sale, the business appraiser’s role is to establish not only the value of the business but also a detailed explanation justifying that value. The business appraisal will be used to set a sales price and provide reasoned support for the sales price to your prospective buyers.
● Involve the experts. In addition to an appraiser, you should also consider involving several other experts. First, determine whether you need a broker. A business broker charges a fee to help you sell the business and may be able to obtain a higher price for the business while saving you time. The broker represents you in the process of selling your business and will work with other experts, such as your lawyer and CPA (certified public accountant). If you decide to use a broker, check references and choose one that is familiar with your industry. Even if you decide not to hire a broker, you should have a local lawyer who is familiar with sales of your type of business to ensure that all government and industry-specific regulations are followed. The lawyer will also draft all necessary legal agreements. You should also obtain help from a CPA familiar with small businesses, including their sale and valuation. The CPA can advise you about the tax implications of the sale and complete any necessary tax filings. In addition, the CPA can help with the preparations for the sale by making sure your business’s financial information is in great shape. Make sure you communicate your expectations and goals to all experts involved in the sale and stay in contact throughout the process.
● Preparation of documents. Before the sale, gather financial statements, tax returns, and all relevant legal documents, including employment agreements. Make a detailed list of the inventory, customers, and any real estate or current lease agreements. You should also ensure that any potential buyer signs a nondisclosure agreement to protect your trade secrets and proprietary information. Make a detailed list of what is (and is not) being conveyed as part of the sale. All of these documents are necessary to help you and your attorney prepare a sales agreement for the potential buyer.
● Employees. Your employees have helped your business succeed, and it is important to consider the sale’s impact on them. Would you like to offer them job security in the event the company is sold? Will the employees with the know-how and customer relationships agree to stay on with the new owner? You should consider how to include key employees in the process and perhaps offer them stay bonus agreements to encourage them to remain with the business for a specific period of time after the sale.
● The sale. Ideally, you will receive several offers from potential buyers so you can negotiate the highest and best price for your business. The buyers will need time to review and verify your financials. You will have spent time with your experts getting your business “house” in order for the potential buyers. Now, they need to do their due diligence, so it is important to prepare to answer their questions. Involve your experts in this process. Lean on them to guide you over the finish line.
Establishing and running a successful small business is an extremely rewarding experience. Deciding to sell the business can be complicated, but if you are guided by the right experts, you can smoothly transition ownership of the small business you spent your lifetime building —and you can begin the next chapter of your life. Call our office today to set up an appointment so we can discuss the first steps to making your prospective sale a reality.