When starting a new business, the owner generally is not thinking too far into the future about what may change. They are not thinking of these questions: “Will I always want a business in this state?”, “Will I be moving to another state in the near future?” or “Will I need to get my license to practice in another state and move away?”
For the majority of my clients, when they form their legal entity in New York, whether it be a PC, a professional corporation, or a PLLC, a professional limited liability company, they are with that entity for years, in the same state, without many changes to the entity itself. However, occasionally and sometimes unexpectedly, someone needs to decide about moving forward and moving out of state becomes a realistic possibility. This happened more frequently because of COVID-19, but it can happen for any number of reasons.
And the big question that always comes up in this situation is, “Can I continue to use that original PC or PLLC if I’m living in a different state?” The answer is generally “yes”, however, there are parameters that will benefit you to understand why while making this decision.
Consider the following:
- Do you still intend on providing care, whether it be in person or through telehealth, in the state of New York, after you move out of state?
- Do you have a license in the other state that allows you to provide patient care?
- Will you be predominantly working in the new state for your career moving forward or is this only for a temporary, definitive period of time?
Answers to these questions are important because a legal entity can be considered a foreign entity transacting business in a different state. There is specific paperwork that must be filed, along with mandatory filing fees, and, depending on the rules of the new state, there may need to be a change of the name of the legal entity to abide by the new state rules.,
This can get a little tricky. If you are thinking of never moving back to New York to provide services and concentrating solely in the new state, then starting an entirely new legal entity in the new state may be the easiest path to take. If this is the case, then you will need to dissolve the already existing legal entity and file a final tax return. However, there are many other factors to consider prior to dissolving, and working with your accountant and attorney will be most beneficial.
Whenever you decide to form a legal entity, you should do so knowing that you will be in that state for a minimum of five years or more. If there comes a point where you absolutely must move for unforeseen circumstances or reasons, always discuss the situation with your attorney and accountant prior to making any changes. This will ensure that you are protected, that you are not putting yourself, your practice or your patients in harm’s way, and to understand your options before you physically make the move to the new state.
In life, everything is about timing and everything always takes longer than anticipated. Moving your entity to another state will definitely take time and you will need to take many things into consideration before making that leap. Having all the information in front of you before you do any sudden moves, especially with your career, will be the best way to protect you and your practice.