By Jeff Unger
If you are an entrepreneur living in Arizona who forms an Arizona corporation for your web-based business, what happens when your wife’s company moves to New York? In New York, your corporation would be considered “foreign corporation” and you would have to qualify to do business in New York. After qualifying to do business in New York, you would then be responsible for New York and Arizona franchsie taxes, and you would also have to file tax returns in both states.
Although widely assumed to be an easy process of simply reincorporating in a new state under Internal Revenue Code Section 368(a)(1)(F), until very recently, the traditional solutions were to either dissolve the existing corporation and form a new corporation; or form a new corporation and merge the Arizona corporation into the new corporation. Even worse, forming a new corporation, required the entrepreneur to have a new Tax ID number and new bank accounts, among other inconveniences.
On August 1, 2009, Delaware came to the rescue by broadly enabling existing entities to convert to Delaware entities (without a cumbersome merger). The new law even permits the conversion of one entity type to another entity type (e.g., the conversion of an Arizona LLC to a Delaware corporation). See Section 265 and 266 of the Delaware General Corporation Law.
The process is simple. The first step is to conver the Arizona corporation to Delaware corporation. This requires filing a Certificate of Conversion along with a Certificate of Incorporation. The second step is simply to qualify the Delaware corporation to do business in New York.
Only Delaware makes it easy for a small business owner to pick up and move the corporation to a new state without the hassle of coversion or merger. Let’s say you wanted to move the corporation to Florida. To do so, you would simply surrender the right to transact business in New York and qualify to do business in Florida. Although Delaware is touted as a haven known for its low annual fees and well founded corporate law, the real benefit of Delaware to a small business owner is mobility.
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Topics: Small Business | Comments Off
MLA Style Citation:
Unger, Jeff "How To Change The State Of Incorporation." How To Change The State Of Incorporation. 26 Jun. 2010. uberarticles.com. 12 Sep 2014 <http://uberarticles.com/business/small-business/how-to-change-the-state-of-incorporation/>.
APA Style Citation:
Unger, J (2010, June 26). How To Change The State Of Incorporation. Retrieved September 12, 2014, from http://uberarticles.com/business/small-business/how-to-change-the-state-of-incorporation/
Chicago Style Citation:
Unger, Jeff "How To Change The State Of Incorporation" uberarticles.com. http://uberarticles.com/business/small-business/how-to-change-the-state-of-incorporation/
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