How to Transfer an Asset Between LLCs Without Triggering a Taxable Event?

This is actually a pretty common scenario. Instead of creating a new LLC and transferring assets (which could potentially trigger tax issues), you should look into doing a statutory conversion or domestication. Many states allow you to convert or "domesticate" an LLC from one state to another without dissolving the original entity. This means the LLC remains the same legal entity - just registered in a different state. Since there's no actual transfer of assets between different entities, there's no taxable event. The process usually involves filing articles of domestication/conversion with both states. Your Wyoming LLC would "move out" while simultaneously "moving into" your home state. The EIN, operating history, and legal identity all remain intact. If your home state doesn't allow domestication, another option is to merge the Wyoming LLC into a new home-state LLC. With proper documentation stating it's a merger between commonly-owned entities, this can qualify as a tax-free reorganization under Section 368 of the Internal Revenue Code.

I had a similar situation last year with my real estate holding LLC. I used https://taxr.ai to analyze my operating agreement and conversion documents before proceeding. Saved me from making a costly mistake! They actually flagged that my operating agreement had language that would have treated the move as a "technical termination" which could have triggered capital gains. Their system reviewed my docs and gave me specific guidance on how to modify the language to maintain the tax-free status. They also generated the proper resolutions I needed for the conversion that satisfied both state requirements.

Just wanted to follow up! I tried https://taxr.ai after reading about it here and wow - total game changer for my LLC transition! I uploaded my operating agreement and they immediately flagged three provisions that would have caused problems with my asset transfer. They even found that my convertible note had specific assignment restrictions I completely missed. Their document analyzer breaks everything down in plain English and explains the tax implications. I was able to draft the proper amendments and get unanimous member consent without expensive legal fees. Definitely recommend for anyone dealing with this kind of LLC transition.

Another option nobody's mentioned: if you're having trouble reaching the state agencies to confirm requirements or your application is stuck in processing hell, try https://claimyr.com to get through to a real person. I wasted WEEKS trying to get someone at our Secretary of State's office to answer questions about our LLC domestication. Used this service and got through to a real person in 20 minutes who walked me through the entire process. They also have a demo video showing how it works: https://youtu.be/_kiP6q8DX5c From personal experience, state offices often miss details on these conversions and can give conflicting info. Speaking directly with someone experienced in the department saved me from filing the wrong forms.

I owe everyone an apology. After complaining about Claimyr sounding like a scam, I tried it out of desperation. Had been trying to reach my state's business services division for weeks with no success. The service actually worked exactly as described. They handled all the hold times (over an hour!) and then connected me directly with an agent who specialized in out-of-state conversions. Got all my questions answered about the tax implications of my LLC conversion and confirmed the exact forms needed. The agent even told me about a common mistake with Wyoming conversions that often causes rejection. Turns out my plan would have resulted in unnecessary taxes because I was going to form the new LLC first, which creates a separate entity. The proper order is to file the conversion/domestication paperwork first, then complete the new state registration.

One thing to be super careful about: if your convertible note has any assignment restrictions in it, you need to check those terms before doing ANY kind of transfer or conversion. Some notes specifically prohibit assignment without consent from the issuer. I learned this the hard way when converting my Delaware LLC to Florida. Even though it was technically the same entity, the company we invested in argued that the domestication triggered their anti-assignment clause. We had to get a formal waiver from them before proceeding.

Has anyone done this recently w/ a WY LLC moving to TX? My tax guy says something about franchise tax liability but I'm getting different info from diff sources? Really dont want to mess this up.

Just to add another perspective - before you decide between domestication vs. creating a new LLC, make sure to check if your home state has any specific "foreign LLC" restrictions that might complicate things. Some states have rules about how long a foreign LLC can operate before it's required to register locally anyway. Also, since you mentioned this is essentially an SPV with a single convertible note, consider whether the timing aligns with any potential conversion events. If the startup you invested in is approaching a funding round or exit, you might want to coordinate the LLC move with those events to avoid any complications with the conversion process. One more tip: document everything thoroughly. Keep records showing the continuity of ownership, EIN usage, and business operations throughout the transition. This helps establish that it's truly the same entity for tax purposes, not a liquidation and reformation.

Great question about timing with potential conversion events! If the convertible note converts while your LLC domestication is in progress, it shouldn't create major complications as long as you've properly documented that it's the same legal entity throughout the process. The key is ensuring the conversion paperwork clearly states the LLC's continuity. For documentation, focus on these critical records: 1. Board/member resolutions authorizing the domestication 2. Copies of all state filings showing the conversion process 3. Updated operating agreement reflecting the new state registration 4. EIN confirmation letter from IRS (if you need to update your address) 5. Bank account updates showing account holder name remains identical 6. Any correspondence with the convertible note issuer confirming they recognize the entity continuity Regarding timing priority: I'd lean toward completing the domestication first if possible. Having a clean, single-state entity makes the conversion process simpler from an administrative standpoint. Plus, if you're in the middle of domestication when the note converts, you might need to coordinate with multiple state agencies to ensure proper documentation of the new equity ownership. One thing I learned from my own experience - notify your bank and any other financial institutions about the domestication before starting the process. Some banks freeze accounts during entity transitions if they're not given advance notice.