Moving your Business to NC

Your wife just got her dream job in Research Triangle Park. What do you do with your New York corporation or your Texas LLC?

There are a number of options to “domesticate” a “foreign” entity in North Carolina. An entity is domestic to the state in which it was formed. If it does business anywhere else, it must register or “qualify” to do business there. Doing business in NC generally means having a warehouse, store, office or sales representative in the state.

The following activities are not considered “doing business” in North Carolina: engaging in litigation, holding meetings of shareholders, directors, members or managers, having a bank account, having a securities account, soliciting or processing orders, or creating or acquiring debt.

A business that will no longer have ties to the original formation state may simply close the original entity and file a new North Carolina LLC or corporation. This works best for something like a consulting company that relies mostly on the labor of the owner and contractors. It has few hard assets that would need to be transferred.

For a company with more equipment, inventory, vehicles or other hard assets, a strategy may be to merge the foreign company into an NC company, with the NC entity being the survivor. All the assets would transfer per the merger.

Finally, the original company may continue to do business in its state of formation, but also will do business in North Carolina. In this instance, it may be best to keep the foreign entity, and qualify to do business in NC. This will require filing tax and secretary of state documents in both states.

If you are found to be doing business in North Carolina without registering here, your company may be subject to tax penalties. It also may not be able to bring a lawsuit in NC courts.

There may be tax, as well as legal, considerations in deciding what to do with your foreign entity when you relocate to NC. You should consult both your attorney and CPA to protect yourself.