| Domesticating involves the "transfer" of an existing | | | | Although qualifying to do business as a foreign |
| corporation to a new jurisdiction. If you are planning | | | | corporation authorizes a corporation to enter into |
| to relocate your business outside of the State within | | | | transactions and have a presence in the foreign |
| which you are now incorporated, you may want to | | | | state, it remains subject to any limitations on its |
| domesticate. Although you have the option of merely | | | | operations as a result of being domesticated in its |
| dissolving the existing corporation and re-incorporating | | | | state of formation. There may be good reasons for |
| in your new home state, Domestication may be the | | | | a corporation to be domesticated in a state other |
| more attractive alternative. This is because | | | | than where it was formed. For example, suppose a |
| Domestication allows you to retain the "age" of the | | | | corporation were formed in State X but does most |
| corporation, which may be important if you want to | | | | of its business in State Y. The corporation may be |
| keep your existing Federal Tax Identification Number, | | | | subject to taxation by State Y on sales of its |
| corporate bank accounts and lines of credit. In | | | | products in State Y and may also be subject to tax |
| addition, retaining the "age" of the corporation may | | | | on its income in State X, because it is domesticated |
| be useful if you are applying for new lines of credit | | | | there. If a corporation domesticated itself as a |
| and/or special government exemptions. | | | | corporation in State Y, its income would not be |
| It is not necessary for you to have a complete | | | | subject to taxation in State X. |
| knowledge of the governing laws, rules, policies and | | | | Historically, corporations could domesticate in a new |
| or restrictions relating to each State's requirements | | | | jurisdiction by using a merger procedure. A new |
| for Domestication. | | | | domestic corporation was formed in the new state |
| This will allow you to take advantage of all of the | | | | and the existing corporation was merged into it. |
| benefits while retaining your original incorporation date | | | | Merger of a foreign corporation with a domestic |
| that the company first came into existence in the | | | | corporation is authorized in the laws of every state. |
| non-United States jurisdiction and continuing to be | | | | Modern corporation statutes are now permitting |
| deemed the same entity. | | | | domestication by a more direct method, authorizing a |
| You can also change your company's business | | | | procedure whereby the corporation can simply |
| structure at the same time if your attorney or | | | | domesticate itself in a new jurisdiction. |
| accountant has advised you that it would be best for | | | | The Model Business Corporation Act permits a |
| your individual circumstances. | | | | foreign corporation to become a domestic |
| Whereas business "conversion" involves a change in | | | | corporation if the process is permitted by the laws |
| the type of business entity (converting a partnership | | | | of the state of formation. Thus, a corporation in |
| to LLC, an LLC to corporation, etc.) business | | | | state X will be allowed to domesticate itself in state |
| "domestication" involves changing the state in which a | | | | Y only if the laws of state X authorize this |
| business entity is organized. For example, a | | | | procedure. The domestication procedure in the Model |
| corporation originally organized in the State of | | | | Business Corporation Act is very similar to other |
| Minnesota can be moved to the State of South | | | | fundamental changes in the corporate structure. A |
| Carolina and be treated under the law as the same, | | | | plan to domestication is adopted by the board of |
| on-going corporation. In other words, with respect to | | | | directors and is submitted to the shareholders for |
| the state of South Carolina the "foreign" corporation | | | | their approval. The plan must include |
| (foreign, because organized outside of South Carolina) | | | | 1. The new jurisdiction in which the corporation is to |
| can be "domesticated" into South Carolina. | | | | be domesticated |
| * Sole Proprietorship to Partnership | | | | 2. Any amendments to articles of incorporation that |
| * Sole Proprietorship to Corporation | | | | are necessary or desired |
| * Sole Proprietorship to LLC | | | | 3. The manner and basis of reclassifying shares of |
| * Partnership to LLC | | | | the corporation based upon the laws of the new |
| * Partnership to Corporation | | | | state of domestication |
| * Corporation to LLC | | | | 4. Any other terms and conditions of the |
| * LLC to Corporation | | | | domestication. |
| will work with you to make sure your relocation plans | | | | The plan must be approved by the shareholders by a |
| move forward expeditiously and your business grows | | | | majority vote, like the cases of merger or share |
| where it needs to grow. | | | | exchange, if there are provisions of the |
| Whenever a corporation has been formed in one | | | | domestication that will affect the rights of a particular |
| state and prefers to be governed by the laws of | | | | class of shares, such a class must be allowed the plan |
| another state, it is possible to change the state of | | | | as a separate voting group. |
| domestication. Of course, any corporation formed in | | | | Same employer identification number may or may |
| any state may qualify to do business in other states | | | | not be used if filing article of domestication or article |
| and be entitled to be benefits of the laws of the | | | | of continuation in other state. It depends on the |
| foreign jurisdiction for the business conducted there. | | | | availability. |