How to Move an LLC to Vermont

There are many reasons why a business owner may want to move an LLC to Vermont. This article discusses the use of domestication, known in some states as LLC conversion, to transfer an LLC to Vermont.

What is Vermont LLC Domestication?

Vermont domestication is a procedure authorized by Vermont law that lets an LLC change the state that primarily governs the company.¹ Vermont’s domestication process allows an LLC formed in another state—called a foreign LLC or out-of-state LLC—to transfer to Vermont.² An out-of-state LLC that completes a Vermont domestication becomes a Vermont LLC governed by Vermont’s LLC law. The domesticated LLC is still the same company except that Vermont is now its state of formation—or domicile.³

Vermont LLC Domestication vs. Conversion

Another legal procedure that Vermont law authorizes—called a conversion—lets a business change into a different type of entity.⁴ For example, a Vermont corporation can use the conversion process to change into a Vermont LLC.⁵

Some states have a single conversion procedure that can transfer a company to a new state or change it into a different entity type (or both). Vermont separates the two goals:

• A Vermont domestication always changes the company’s domicile.
• A Vermont conversion always changes a business from one entity type to another.

A Vermont conversion can sometimes change a business’s domicile, but only if the business also changes into a different type of entity. Thus, an out-of-state LLC can convert into a Vermont corporation.⁶ But, an out-of-state LLC becomes a Vermont LLC using the domestication process.

Why Transfer an LLC to Vermont?

A domestication into Vermont may be more practical for an owner who lives in Vermont, or it may be a good business move for an out-of-state owner who wants to take advantage of Vermont’s business laws. These are some of the more common reasons to move an out-of-state business to Vermont.

• The business is moving with the owners. A business owner may transfer a business to Vermont if the owner moves to Vermont. An LLC governed by the law of the state where the owner lives is often more convenient and may reduce the potential for legal issues.
• Vermont offers legal or structural advantages for the company. While Vermont is not typically considered a pro-business state, a move to Vermont may nonetheless help an LLC if Vermont’s business laws are a better fit for the company. For example, Vermont was the first state to authorize blockchain-based LLCs (abbreviated as BBLLCs)—an innovative model that allows for decentralized management of a company using the technology behind cryptocurrencies.⁷ Vermont’s LLC laws also authorize the low-profit LLC (L3C) model that not all states recognize.⁸
• Transferring the LLC to Vermont makes hiring professionals easier. An LLC owner who lives in Vermont may be better able to establish business relationships with local professionals if the company is governed by Vermont law. A Vermont-resident owner will have relatively little difficulty identifying local accountants, lawyers, and other professionals who are familiar with Vermont’s business laws and regulations. Professionals who live in Vermont are less likely to have experience with a different state’s law.
• The owner wants to avoid multiple annual reports. Domesticating an out-of-state LLC into Vermont may save the business time and money on annual reporting. An out-of-state LLC that does most of its business in Vermont usually must file annual reports in both states. A domestication may let the company avoid the original state’s annual reporting and fee requirements. Vermont’s annual requirements for LLCs are light—just a report filed online and a $35.00 report fee. By comparison, the annual fee for an out-of-state LLC that does business in Vermont is $140.00
• Domestication saves the LLC on taxes. Vermont ranks among the ten states with the highest taxes on businesses. However, a domestication may still save the LLC on taxes by reducing the number of states that tax the company. This is because a business and a state must have a sufficient connection—called a taxable nexus—for the state to tax the business. The LLC may avoid further taxation by the original state if a Vermont domestication ends the LLC’s taxable nexus with the state.

What are the Benefits of Vermont LLC Domestication?

A Vermont LLC domestication allows a business owner to transfer an LLC from another state to Vermont without disrupting day-to-day operations. Other strategies for moving a business—such as using the merger process or dissolving and re-forming—are more time-intensive and costly.

Principal benefits of the LLC domestication process compared to alternative methods include:

• It’s still the same company with the same tax history. An out-of-state LLC that domesticates to Vermont is the same company after the domestication—just domiciled in Vermont.⁹ It continues its taxpayer history and existence in Vermont and continues to use the same Employer Identification Number (EIN). The continuity in the business’s existence avoids potential confusion and extra administrative work.
• The Vermont company has the same bank accounts and property. Because the Vermont LLC is still the same company, it still owns all the property that the out-of-state LLC owned.¹⁰ The company can keep its same banks accounts and does not need to transfer assets.
• The LLC’s contracts are still valid. If the out-of-state LLC was a party to business contracts before the domestication, the contracts are still valid and enforceable after the domestication. The company has the same rights and obligations, and renegotiations are unnecessary.
• The LLC keeps operating as normal. There is no need for a domesticating LLC to pause or stop its day-to-day operations. The LLC’s employment relationships with its employees are not affected, so releasing and re-hiring staff is unnecessary.
• The company does not have to dissolve in the original state. Some methods of transferring an existing business to a new state require dissolution of the company in the original state—which is a complex procedure that often involves substantial legal fees. A Vermont LLC domestication does not require the company to dissolve in its original state—making the move quicker and less expensive.¹¹
• The LLC need not register as a foreign LLC. An LLC that domesticates into Vermont does not have to register as a foreign LLC in the original state unless it will continue doing business there. Avoiding registration as a foreign LLC saves money upfront and avoids annual reporting in the future. The company also has no need to register as a foreign LLC in Vermont since after the domestication it is a Vermont LLC (and therefore not foreign in Vermont).

What LLCs Can Convert to Vermont LLCs?

Domestication is the most streamlined way to move an out-of-state LLC to Vermont, but it is not possible for every company. Vermont law allows domestication of out-of-state LLCs only if the company’s current state also authorizes LLC domestications.¹² The current state may use the name conversion—as long as there is a statutory process that an LLC can use to change its domicile.

Even if the current state allows LLC domestications, a company considering a Vermont domestication needs to confirm that Vermont law allows LLCs to engage in its type of business. Vermont expressly disallows LLCs to operate as credit unions, insurance companies, or railroad companies.¹³ An out-of-state LLC involved in a business that Vermont LLCs cannot do should not complete a Vermont domestication.

Vermont also recognizes three special LLC categories that are subject to additional requirements beyond the requirements for ordinary companies.

1. Professional limited liability companies (PLLCs). A Vermont PLLC is a company in the business of providing a professional service—a service that can be offered only by persons with a license or comparable authorization from a Vermont licensing authority.¹⁴ A domesticating company that will be a Vermont LLC must ensure that it is owned only by licensed persons and that its members, employees, or other individuals providing the professional service all have the right licenses (among other requirements).¹⁵
2. Low-profit limited liability companies (L3LLC). A Vermont low-profit LLC (abbreviated as L3LLC) is a company formed specifically for a charitable or educational purpose.¹⁶ An L3LLC must have no political or legislative purpose and must not be formed for income production or asset appreciation.¹⁷
3. Blockchain-based limited liability company (BBLLC). A BBLLC uses blockchain technology for one or more important parts of its activities—allowing for decentralized management of the company.¹⁸ A Vermont BBLLC must have a written operating agreement that states certain information—such as the BBLLC’s purpose, whether it is fully or partially decentralized, how someone becomes a member, and how voting procedures work on the blockchain.¹⁹

Each of the above types of Vermont LLCs must meet multiple extra requirements to operate lawfully in Vermont. An out-of-state LLC that will become a Vermont PLLC, L3LLC, or BBLLC needs to ensure that it can comply with all legal requirements before starting a domestication into Vermont.

How Much Does Vermont LLC Domestication Cost?

An LLC that domesticates into Vermont will incur domestication costs during the process. The principal domestication costs are the labor costs that the service provider charges, filing fees that state agencies charge, and commercial registered agent fees (if hire).

Service Provider’s Labor Costs

A service provider hired by an LLC to assist with the domestication will charge labor costs for the time spent on the project. The service provider’s work includes:

• Gathering information needed to assist in planning the domestication and draft domestication documents;
• Preparing the plan of domestication, articles of domestication, articles of organization, and the documents that the LLC’s current state requires;
• Communicating with the business owners to plan the domestication and arrange for signing of the domestication documents; and
• Filing domestication documents with the Vermont Secretary of State’s Business Services Division and the current state’s equivalent office.

Service-provider labor costs vary between providers and may be a flat fee or an hourly rate.

Filing Fees

A domesticating LLC must file domestication documents with state filing offices in Vermont and in the current state. The Vermont Secretary of State’s Business Services Division charges $145.00 for a domestication into Vermont. The amount consists of $125.00 for the articles of organization and $20.00 for the articles of domestication. The filing fee in the current state depends on the LLC’s current domicile state.

Registered Agent Fees

Vermont law requires LLCs to name and maintain a registered office and a registered agent.²⁰ An LLC’s registered agent is an individual or business that has legal authority to accept service of process and important communications for the company. A registered agent must be an individual Vermont resident or an entity with authority to do business in Vermont.²¹ The agent must have a street address and mailing address in Vermont.

Although a member or manager who lives in Vermont can be an LLC’s registered agent, LLCs often choose to hire commercial registered agents to avoid making a member’s or manager’s contact information publicly available. A commercial registered agent charges an annual fee—typically around $100.00 – $150.00 per year—to act as a business entity’s registered agent. Commercial registered agents are also a useful resource for a business without a Vermont address, and they help protect privacy and keep important communications consistent and organized.

How Long Does Vermont LLC Domestication Take?

A Vermont LLC domestication is a multi-step process. The amount of time an out-of-state LLC needs to domesticate into Vermont depends on the parties’ turnaround time for each step.

• Members’ or managers’ turnaround time to plan the domestication and provide information to the document preparer;
• The service provider’s or other document preparer’s turnaround time to organize information and draft domestication documents;
• The members’ or managers’ turnaround time to review, approve, and sign the domestication documents (or request revisions);
• The document preparer’s or other responsible person’s turnaround time to file the signed domestication documents with the Vermont Secretary of State’s Business Services Division and the current state’s equivalent agency; and
• The state agencies’ time to process the domestication documents.

The Vermont Secretary of State’s office typically processes online filings within one day and paper filings within 7-10 business days.

What Laws Govern Vermont LLC Domestication?

A Vermont LLC domestication must be carried out in compliance with Vermont law and with the current state’s law.²² Vermont law lays out the domestication process, filing requirements, and legal effects in Vermont.²³

The domestication law in the LLC’s current state controls several issues:

• Whether the LLC can legally domesticate into Vermont (the state must authorize LLC domestications);²⁴
• How the LLC’s members or managers approve the domestication;²⁵
• What domestication documents the LLC must file in the current state; and
• What (if any) additional domestication requirements the current state has.

Members, managers, or another person who plans the domestication needs to be familiar with both states’ domestication laws. If both states address a part of the domestication process, the LLC needs to meet both requirements. For example, Vermont has a list of items that an LLC must include in its plan of domestication.²⁶ Many states have their own similar lists. A company transferring to Vermont needs to include each item contained in either state’s list.

What is the Vermont LLC Domestication Process?

The Vermont LLC domestication process consists of two components: document preparation and administrative tasks.

Document Preparation

The Vermont LLC domestication process requires the business to prepare a series of domestication documents. The documents must comply with Vermont law and the current state’s law, so the person responsible for drafting the documents should be familiar with both.

• Plan of Domestication. A Plan of Domestication that is designed to comply with the requirements of both Vermont law and the law of the state that the LLC is moving from.
• Vermont Articles of Domestication. The Vermont Articles of Domestication with all information and any related documents needed for filing with the Vermont Secretary of State’s Business Services Division.
• Domestication Document for Filing in Prior State. Depending on state law, this document may be called articles of domestication, statement of domestication, articles of conversion, certificate of conversion, statement of conversion, certificate of conversion, or a similar term.²⁷
• Vermont Articles of Organization. The Vermont Articles of Organization for filing with the Vermont Secretary of State’s Business Services Division.
• Vermont Operating Agreement. A state-specific Operating Agreement to properly structure the LLC as a Vermont LLC, provide rules for profit distributions and decision-making, clarify the federal income tax classification, and help provide maximum liability protection.
• Resolution Authorizing Domestication. A resolution approving the transaction and adopting the Vermont organizational documents as the LLC’s governing documents.

Administrative Tasks

A domesticating LLC’s member, manager, or other agent needs to complete multiple administrative tasks to finalize the domestication into Vermont.

• Conduct preliminary name search. Check the official records of the Vermont Secretary of State’s Business Services Division to determine whether the LLC’s name is available in Vermont. (If the name is unavailable, a slight name change may be required to complete the domestication.)
• Obtain signatures on the Articles of Domestication. The Articles of Domestication must be signed by the required parties. The Vermont Secretary of State’s Business Services Division requires a manual (wet) signature on the Articles of Domestication (no e-signing).
• Obtain signatures on the Articles of Organization. The Articles of Organization must be signed by the required parties. The Vermont Secretary of State’s Business Services Division allows the Articles of Organization to be e-signed.
• File the Articles of Domestication. File the Articles of Domestication with the Vermont Secretary of State’s Business Services Division. The Businesses Services Division requires the Articles of Domestication to be filed by mail or in person (no e-filing).
• File the Articles of Organization. File the Articles of Organization with the Vermont Secretary of State’s Business Services Division. The Businesses Services Division allows Articles of Organization to be e-filed. However, Articles of Organization prepared for a domestication should be filed as an attachment with the Articles of Domestication.
• File domestication documents with prior state. File the domestication documents with the Secretary of State or equivalent agency for the state that the LLC is moving from.

What is the Legal Effect of Vermont LLC Conversion?

Vermont’s LLC domestication procedure changes an out-of-state LLC’s domicile to Vermont without interfering with the company’s ordinary operations. The company is the same entity throughout the process. The Vermont LLC continues the out-of-state LLC’s existence, so it still has the same administrative history and keeps using the same federal Employer Identification Number (EIN or FEIN).

Vermont’s domestication law outlines the legal effects of a domestication—which are designed to minimize the procedure’s legal impact other than the change of jurisdictions.

• LLC assets. All real estate, personal property, and other assets that the out-of-state LLC owned are now the Vermont LLC’s property.²⁸ The domestication is not considered an asset transfer, and there is no need to prepare deeds or other documents to pass title to the Vermont LLC.
• LLC liabilities. The company is still responsible for all of the out-of-state LLC’s obligations. Debts, taxes, and liabilities that were owed by the out-of-state LLC are now owed by the Vermont LLC.²⁹
• Legal proceedings. The Vermont LLC becomes a party to all legal cases or proceedings that the out-of-state LLC brought or that were brought against it. Court cases and other legal actions move forward as if the domestication had not occurred.³⁰
• Business agreements. The company’s business contracts are still valid and enforceable following the domestication. The Vermont LLC has all contractual rights, duties, and obligations that the out-of-state LLC had before the domestication.³¹
• Company ownership. The terms of the domestication described in the LLC’s plan of domestication become effective when the domestication is complete—unless the plan of domestication says differently.³² Domestication terms include the manner in which ownership interests in the out-of-state LLC are converted.³³ Members typically exchange interests in the out-of-state LLC for interests in the Vermont LLC—with members keeping the same percentages and rights. Members can also agree to convert some or all of a member’s interest into cash, property, or other consideration.
• No dissolution. An out-of-state LLC’s domestication into Vermont does not require or result in dissolution of the company in the original state.³⁴ The company continues its existence as the Vermont LLC. It can request authorization to transact business in the original state as a foreign LLC, but registration as a foreign LLC is not essential to the domestication process.

1. 11 Vt. Stat. § 4152.
2. 11 Vt. Stat. § 4152(a).
3. 11 Vt. Stat. § 4155(a)(1).
4. 11 Vt. Stat. § 4142.
5. 11 Vt. Stat. § 4142(a).
6. 11 Vt. Stat. § 4142(d).
7. 11 Vt. Stat. § 4172.
8. See 11 Vt. Stat. § 4161.
9. 11 Vt. Stat. § 4155(a)(1).
10. 11 Vt. Stat. § 4155(a)(2).
11. 11 Vt. Stat. § 4155(a)(7).
12. 11 Vt. Stat. § 4152(a)(1).
13. 11 Vt. Stat. § 4011.
14. 11 Vt. Stat. 817(5).
15. 11 Vt. Stat. § 830.
16. 11 Vt. Stat. § 4161.
17. 11 Vt. Stat. §§ 4162(2)-(3).
18. 11 Vt. Stat. § 4172.
19. 11 Vt. Stat. § 4173(2).
20. 11 Vt. Stat. § 4007(a).
21. 11 Vt. Stat. § 4007(b).
22. 11 Vt. Stat. § 4152(a).
23. 11 Vt. Stat. §§ 4154–4155.
24. 11 Vt. Stat. § 4142(a).
25. 11 Vt. Stat. § 4154.
26. 11 Vt. Stat. § 4152(c).
27. Fourteen states use the term articles of domestication to refer to the document that must be filed with the state to approve the domestication: Iowa, Massachusetts, Minnesota, Nebraska, New Hampshire, New Jersey, North Dakota, South Dakota, Utah, Vermont, Virginia, Wisconsin, Wyoming, and Indiana. The corresponding document may be called a statement of domestication (Alaska, Arizona, Connecticut, Idaho, Illinois, Mississippi, and Pennsylvania); articles of conversion (Florida, Nevada, North Carolina, Oregon, and Washington) or certificate of conversion (California, Delaware, Georgia, Michigan, Ohio, and Texas). It may also be called a statement of conversion (Colorado, Maine), certificate of domestication (Kansas), request for conversion (Louisiana), or statement/plan of domestication (District of Columbia).
28. 11 Vt. Stat. § 4155(a)(2).
29. 11 Vt. Stat. § 4155(a)(3).
30. 11 Vt. Stat. § 4155(a)(4).
31. 11 Vt. Stat. §§ 4155(a)(2)-(5).
32. 11 Vt. Stat. § 4155(a)(6).
33. 11 Vt. Stat. § 4152(c)(3).
34. 11 Vt. Stat. § 4155(a)(7).