New York(Washington Insider Magazine) -Redomestication is the process by which a legal entity moves from its original state of formation to another state. This can happen if the entity’s sole founder plans to move to a new state and wishes to dissolve all ties with the previous state. The entity often also intends to cut off any relationships with the state including the costs imposed by, the original state of formation.
The tricky thing about redomestication is that during the process the original state must permit the entity to redomesticate to a new state. It is also important that the new state also permits the entity to redomesticate from the original state.
What Is Redomestication?
Redomestication is a complicated procedure that many people don’t have any idea about. In simple words, it is a process carried out by a corporation or LLC. The entity changes its domestic jurisdiction to another jurisdiction.
Some states in the USA permit the conversion while other states don’t allow any such thing. It is important to check the laws of your state before you plan to do Redomestication process. In a state where the conversion is not permitted, you can avail of the following two options. You can either dissolve the original entity and form a completely new entity in the new jurisdiction. The other option is to form a new entity and later merge the old entity into the new entity.
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Does California Allow Redomestication?
Redomestication is only possible if both the states involved in this process allow it. The states authorize a statutory corporate and the entity has to follow a re-domicile procedure. Under such circumstances, the corporation can convert the existing corporation and can work with the new state of incorporation. California does not authorize Redomestications.
States differ when it comes to redomestications they permit. When it comes to Delaware this state offers maximum flexibility. You can carry out any type of procedure and move your business from one state to another without any trouble. The entity may redomesticate into or out of Delaware without any problems.
California, on the other hand, is considered to be flexible in many instances. On a sad note, the state does not permit a California corporation to redomesticate and move to another state. If you are planning to move your business corporation from California, then you don’t have any chances for redomestication. The only way you can make it workaround is to convert the corporation to a California limited liability. This is when you can proceed with your current business ventures in another state.
Does New York Allow Redomestication?
If you live in New York and looking for redomestication then we have some sad news for you. The state does not allow any conversions. If you are looking to expand your business in New York, then you will have to form a completely new corporation. You cannot move any entity from New York to some other state. A new entity must be formed first and then the domestic LLC will be allowed to be merged into it.
Can You Convert A Texas LLC To A California LLC?
Business owners who move to California use the California LLC conversion if they intend to “bring the business with them” to California. The domestication law in California allows out-of-state LLCs to become California LLCs. The entity has to follow the statutory procedure and do the conversion.
The term domestication refers to moving an LLC from one state to another but the entity doesn’t change its form during the move. An LLC that domesticates from another state to Texas is still considered to be an LLC. The only difference is that the law operated by the new state—Texas will now be governing the LLC.
Texas law uses the conversion term to refer to an LLC domestication. The LLC in Texas is converting from one type of entity and changing itself entirely to a different type of entity. If you are planning to move an in-state, or domestic, entity then you will have to follow a different procedure entirely.
This approach is not concerned with any other business ventures carried out in California or Texas. The business owners in Texas and California have to make a lot more effort to merge their entities. Your LLC in California will remain an LLC in Texas but you might not be able to operate your business. Texas is a state that treats the move to a new state and uses its conversion to a new entity type.