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Can a multistate business entity dissolve in one state but continue operations in others?

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During one of my webinars earlier this year, a participant wanted to know if it’s possible to dissolve an entity in one state but continue to operate in other states where the company has a certificate of authority (foreign qualification) to conduct business. 

As a financial professional, you might encounter the same sort of question from your clients. Full disclosure: It can get complicated, and the answer depends on the situation. Below, I’ll step you through some hypothetical examples. But first, I’d be remiss not to mention that any time a client wishes to form, dissolve, foreign qualify or make other changes to their business entity, it’s critical they get professional legal and financial advice. 

Now, let’s dig in!

Can a business be dissolved in its home state but continue to operate out of state?

Before I describe how things generally work, it’s important to establish what “home state” means. 

The state where a business entity (e.g., limited liability company or corporation) has registered its formation documents is its home (domicile) state. If it wants to conduct business (or if it has nexus) in another state, it must file for foreign qualification in that state. The nature of foreign qualification is the company is a registered business entity elsewhere. So, if an entity dissolves in its home state, it will no longer exist and may not continue to conduct business as a foreign entity in any state where it has a certificate of authority. However, there are ways the business owners can continue to operate in the other states. The process for doing so varies depending on the state. 

Domestication

Some states (such as California, Nevada and Utah) allow for “domestication,” enabling LLCs and corporations to change their formation with less paperwork and formalities than forming an entirely new entity. After completing the process (which includes completing Articles of Domestication or a similar document), the entity is registered as a domestic LLC or corporation in the state where it was formerly foreign-qualified. 

For example, suppose an LLC is registered as a domestic limited liability company in California and has foreign qualification to operate as a foreign LLC in Nevada and Utah. Now, the LLC members have decided to close operations in California but want to continue conducting business in the other two states. They opt to domesticate their LLC to Nevada. By following the domestication procedures to close the California LLC and re-home it to Nevada, they may then amend their foreign qualification information in Utah to continue operating as a foreign LLC there.

Dissolve and start anew

Other states (such as Alabama, Delaware and North Carolina) don’t support domestication. So typically, an LLC or corporation must be dissolved in its home state and start from square one in another if its owners wish to re-home their business (even if they’re foreign-qualified in the state where they want to domesticate). That means filing Articles of Dissolution in the home state and withdrawing their foreign qualification in the other states where they conduct business. Then, they must go through the business formation process to form a new LLC or corporation in their chosen state. After the new entity is formed, they can then apply for foreign qualification in the other states where they wish to operate.

For example, if an Alabama corporation wants to cease operations in that state, set up its principal office in Delaware and continue to operate as a foreign corporation in North Carolina, it would need to be dissolved in Alabama and withdraw from foreign qualification in Delaware and North Carolina. Then, its organizers would need to form a new corporation in Delaware and file to have that new corporation foreign qualified in North Carolina. 

Can a business close as a foreign entity but continue to operate in its home state?

Yes!

And it’s far less complicated because the business entity remains intact in its home state despite closing its operations in the states where it is foreign-qualified. The LLC or corporation’s owners would simply follow the specific state’s procedures to withdraw their certificate of authority and wrap up their affairs to close their foreign entity.

Other considerations

In addition to completing the proper forms related to dissolutions, business formations, domestications and foreign qualifications, business owners have other responsibilities when closing or starting a business in or out of state. 

  • Updating the LLC operating agreement or corporate bylaws;
  • Designating or canceling registered agent services;
  • Setting up or closing tax accounts;
  • Obtaining or canceling business licenses and permits;
  • Filing or updating their BOI report;
  • Obtaining, updating or canceling insurance policies; and
  • Updating other public and informing stakeholders (banks, customers, vendors, etc.).

Last but not least, your clients should understand that starting, closing, moving and foreign qualifying a business entity have both legal and tax implications. It’s wise for them to consult with their attorney and tax advisor (a.k.a. YOU if you have the required licensing and expertise to advise them in that capacity) for guidance.

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Accounting

IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Accounting

Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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Accounting

At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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