When to Form a New LLC
Q: When do I need to form a new LLC? Would I be able to change the services I offer under my current LLC, or would I have to start a completely new one?
Thank you to a client from Mississippi for that great question! The short answer is that you can almost always keep using your current LLC, even if you start a completely new business. You’d typically just need to amend your articles of organization and operating agreement and change your LLC name or get a DBA. However, there are a few cases when it may be necessary (or just easier) to start a new LLC instead. We’ll go over some examples of when you might want (or need) to form a new LLC.
When Converting from an LLC to a PLLC
If you offer professionally licensed services like law or medicine, some states require you to operate as a Professional LLC (PLLC) rather than a standard LLC. Depending on your state laws, you may be able to convert your current LLC into a PLLC by submitting articles of amendment to the government agency that formed your LLC . However, if your state doesn’t allow this conversion, you’ll need to dissolve your LLC and form a PLLC. Either way, you’ll need to meet the professional licensing requirements in your state.
Find out the state by state requirements for professional entities.
When Your LLC Moves to Another State
If you want to transplant your LLC to a new state/jurisdiction, some states will allow you to do this without losing your current LLC through a process called domestication (called “conversion” in some states). However, you can only domesticate your LLC if both the state you’re leaving AND the state you’re moving to allow it. Otherwise, you’ll need to dissolve your LLC and start a new one in the new state.
Even if your jurisdiction does allow domestication, it’s cheaper in some states to simply dissolve your LLC and start over. It’s a good idea to consult a business adviser and find out what makes the most sense for your LLC.
What if I want to do business in both states?
If you want do to business both in the state where you originally formed your LLC and in a new state, you’ll need to register as a foreign LLC. This process typically involves paying a fee and applying for a Certificate of Authority with the Secretary of State. You will be able to use your current LLC in both states and will NOT need a new LLC.
When a Member Leaves the LLC
Usually, when a member leaves an LLC, the LLC can buy out the membership interest of the person leaving and continue operations. However, some LLCs have a provision in their operating agreement stating that if a member leaves voluntarily or is forced out, the LLC must dissolve. If you have a dispute between members and do not have an operating agreement, the dispute will likely have to be settled in court, and the court could decide to dissolve your LLC. With a solid operating agreement, you should be able to avoid this unpleasant outcome, but if it happens, you’ll need to start over with a new LLC.
When Your LLC Is Dissolved by the State
If your LLC doesn’t stay in compliance with the state, whether that’s because you don’t file your annual report or you fail to maintain a registered agent, the state can administratively dissolve your LLC. Usually when this happens, you can reinstate or revive your LLC without having to start from scratch. However, if reinstatement isn’t possible, you’ll need a new LLC.
