We view a migration out of California as possible within three different areas of your life. Each area may be migrated on its own, or in combination with the others. A complete migration from California would involve all three areas. The areas are your personal residence, the residence of your financial assets (or other personal property) and the residence of your business.
Not all clients are willing or can migrate their business or themselves from California. Fortunately, some level of migration is still possible. It is our job to describe how this can be accomplished and to guide you in weighing the pros and cons of such bifurcation.
If you’re reading this it must be that you are already a resident of California. So this article will not discuss how to become a California resident but, rather, how to avoid being a resident of California in the future.
The first thing you must do is establish residency in another state. Each state provides different rules for establishing residency. Sometimes these rules vary for different purposes-for example a different length of time may apply to residency for the purposes of marriage, divorce, drivers license, and taxation, to name a few.
Because each state provides different rules for determining residency, each client’s unique wishes need to be reviewed individually and cannot be covered by this article. However, because of Nevada’s proximity to California, and its favorable tax scheme, it is a popular destination amongst our clients. It is also easy to establish residency in Nevada under Nevada law.
California’s rules provide that you are presumed not a resident of California if you have a permanent residence outside the state and spend less than six months in the state. Obviously, this is a presumption, which even if satisfied may be rebutted by California, which is why it is important to review your unique situation with an attorney. California may audit you to verify that you successfully transferred your residence. The state auditing department is notorious for being noisy. They will speak to your neighbors, review credit card statements, where you tithe, and most every other aspect of your personal lives. For this reason, it is important to maintain good records to clearly prove your presence in the new state.
Moving your business from California to another state also requires precision, careful planning, and commitment. Obviously, our firm will provide the much needed legal support to analyze entity selection, the location of operations, mergers, terminations, transfer of assets, final tax returns, and the host of tax consequences involved. More than that, however, for Nevada bound migrations, our firm is a proud partner of the Las Vegas Global Economic Alliance, a collaboration of business owners working tirelessly to attract and seamlessly transition the business to Las Vegas. This connection will guide you toward various tax incentives available to you and provide you with the opportunity to take root and flourish.
Last, but not least, you may consider migrating your financial assets. Although the physical migration may seem simple-i.e. opening an account with a financial institution in the state of your choosing the legal and tax implications are significant, and the benefits of holding assets in another state are not always easy to obtain. The best legal structure for you will depend on what else, if anything, will migrate from California and your present and expected financial needs. No one solution is best for each client and you need qualified, unique counsel.
Migrating some aspect(s) or all of your life from California may alleviate some of the burdens of California residency. The important thing to remember is that total migration is not the only answer. Partial migration, and even migration in stages, over months and even years, are solutions many of our clients adopt. A consultation with one of our experienced attorneys will open your mind to a world of possibilities.