If you’re running a business and you’ve ever stopped mid-coffee and thought:
“What if we moved our headquarters somewhere with lighter tax load?”
Well, let me assure you: You’re not alone! I’ve seen plenty of business owners wrestle with this question, and making the right decision can change your bottom line significantly.
Today I’ll walk you through how moving from California to Florida or Texas can impact your tax burden, what the key risks are (yes, even in paradise), and what you should know before you pull up stakes.
By the end, you’ll have a clearer sense of whether this isn’t just a lifestyle move but a strategic tax move.
Why California’s Tax Landscape Matters For Business Owners
California is a powerhouse. If it were a country, it would have one of the largest economies on the planet, and for ambitious entrepreneurs, that kind of economic gravity can be a goldmine. There’s money, opportunity, talent, and enough venture capital to make even average ideas feel fundable.
But big opportunity comes with big overhead. Running a small or mid-sized business in California means dealing with some of the highest taxes and strictest regulations in the country. The top personal income tax rate climbs to 13.3%, and California residents pay an average of over $10,000 a year in state and local taxes… far above the national average. That’s money you’re not reinvesting, not hiring with, and not taking home.
So when business owners start daydreaming about Florida or Texas, it’s rarely just about sunshine, palm trees, or cheaper real estate. It’s about oxygen. It’s about operating in a state where the rules don’t squeeze every dollar before you can put it to work.
Leaving California becomes less of a lifestyle choice and more of a strategic tax decision — one that can unlock more growth, more cash flow, and more control. In short: you’re not running from California weather. You’re running from California math.
Florida & Texas: What Sets Them Apart
Let’s compare Florida and Texas head-to-head against California, from a tax perspective:
One of the biggest selling points of Florida and Texas is simple: no state income tax. Zero. Nada. If your business kicks off six- or seven-figure personal income, that alone can feel like going from “California-taxed citizen” to “I get to keep my own money again.”
But before you start packing boxes and Googling beachfront condos, remember this: those states still collect revenue, just in different ways. Texas leans harder on property and sales taxes. Florida does something similar. So yes, you may save a fortune on income tax, but you’ll still feel it when you buy stuff, own stuff, or insure stuff — especially if that “stuff” has a roof near the ocean.
And taxes aren’t the only variable. Cost of living, labor costs, real estate, and regulations can make running a business easier in Florida or Texas. Especially if you’re scaling and need lower payroll or cheaper commercial space. Plenty of companies find the math works out in their favor… as long as they plan the move strategically instead of emotionally.
Big picture? California ranks near the top for total tax burden. Florida and Texas hang out near the bottom, waving politely and sipping sweet tea. But the savings don’t happen automatically. You only win if your personal income, business structure, and operations are set up to take advantage of the difference.
Hence why a tax-planner extraordinaire (like me!) is your best friend.
A Simplified Business Example: $1M In Business Income
Let’s walk through a simplified example to help illustrate the tax difference.
Assume you own a business that nets $1,000,000 (after expenses) in distributable income for you personally. Let’s strip out federal tax (since that stays the same) and focus solely on state income tax implications.
In California: If you recognize that $1,000,000 as personal income in California, you may face the top individual rate of ~13.3% (plus any local add-ons). So roughly $133,000 of state income tax.
In Florida (or states like Texas/Alaska/Arizona): Because there’s no state personal income tax, in the ideal scenario you owe $0 in state income tax on that $1 M (for the personal side). That’s a potential tax savings of ~$133,000 compared to California (just as an illustration).
Now, massive caveats here: you may still owe state corporate tax, franchise tax, sales tax, property tax, and must consider business-structure differences. But from a personal tax standpoint, the savings could be substantial.
Here’s how I break it down for clients: if you’re pulling out big distributions, bonuses, or supervising an S-Corp or LLC pass-through that flushes to you personally, your state tax burden is much lower in Florida or Texas. Over 3-5 years, those savings compound and can become a major competitive edge.
The “Exit Tax” Myth (and what you really need to watch)
People ask me all the time:
“If I move out of California, do I get hit with an exit tax?”
The answer is no — there’s no official “thank you for leaving, now pay us” tax. But California doesn’t exactly send you off with balloons and a goodbye cake either.
If you still earn income tied to California, the state will still tax it. If you don’t fully cut residency ties (like keeping your home, driver license, voter registration, or spending half the year in Malibu) they may decide you never really left and continue taxing all your income.
And if your business keeps operating in California, guess what? It may still owe California taxes too. The zip code on your beach house in Florida won’t save you.
In other words, you don’t escape taxes by shipping your furniture east — you escape by proving, on paper, that California is officially your ex. There are no more shared accounts. You do not have a forwarding address. No “we’re still friends” energy.
Move your life, your legal residence, and your business activity — or California will happily act like you’re “just on a long vacation.”
Selling Your California Home And Moving To Florida: What To Keep In Mind
Many entrepreneurs I work with ask:
“Can I sell my California house, move to Florida (or Texas), and cleanly start over?”
Yes — but here are the items I watch closely:
Capital gain on California home sale: If you sell your primary residence, under federal law you may exclude up to $500,000 of gain (if married filing jointly) or $250,000 (single), subject to meeting ownership and use tests. That applies whether you stay or move.
If you’re moving to Florida, you’ll want to ensure: you meet the federal exclusion rules; you file your California return correctly if you were a California resident during part of the year; and you keep documentation of your new domicile.
Residency change timing: It is easiest to have full year’s worth of new-state domicile before major transactions. Why? Because California may argue you were still a resident when you sold. I’ve seen clients delay a house sale until after they’ve established tight new domicile, and the tax outcome was much cleaner.
New state property and living costs: Remember: although Florida has no state income tax, you’ll still have other costs: property taxes, homeowners association (HOA) fees, potentially higher insurance (especially in coastal regions). So the tax savings should be net of those lifestyle/tradeoff costs.
Business location and operations: If you keep your business in California (or you keep a meaningful presence there), you may still have California tax exposure — even if you personally live in Florida. So business relocation is often part of the picture for meaningful savings.
From my work, the most successful entrepreneurial moves look like: (1) well-documented domicile change, (2) business operations substantially changed or moved, (3) timing of asset sales sequenced around the move. Do the move half-heartedly and you risk California taxation anyway.
What No State Income Tax Really Means — And The Trade-Offs
Relocating to a state without personal income tax (like Florida or Texas) is a major tax lever — but it’s not a free lunch. From my vantage, here are the things to consider:
Benefit: More after-tax income: The obvious upside: more of your profits and personal income stay in your pocket, not surrendered to the state. Over several years the impact becomes large.
Trade-off: Other taxes and cost structures In Florida and Texas you still pay property taxes, potentially higher homeowner insurance (especially hurricane risk in Florida), sales taxes, and you’ll want to evaluate business tax/regulatory burden. For example, Texas might rely more heavily on property taxes and sales taxes.
Lifestyle and Business Ecosystem: This is subtle but real: talent availability, operating costs, infrastructure, logistics, and your existing client base all matter. If you serve clients across the U.S., Florida or Texas may serve you well — but if your business is heavily California-centric, you’ll need to evaluate whether moving impacts your growth or cost base.
Exit vs. Ongoing Savings: Often business owners think “we move once and save forever” — that’s true if you commit to non-residency and shift your business appropriately. If you keep significant ties to California, the state may continue to assert tax claims. So in my counsel I always treat relocation as part of a broader strategy, not a one-time decision.
Should You Pack Up Your Business (and life) Now (or wait)?
In my practice I often ask clients three questions that help decide timing:
- How much of your income flows to you personally? If you’re drawing significant personal distributions or bonuses from your business, avoiding state income tax becomes more meaningful.
- How tied is your business to California operations? If you have employees, a physical office, inventory, or supplier network in California, moving will require operations changes (and potentially tax restructuring).
- What are your lifestyle and growth goals? If you’re scaling, hiring nationally, or looking for talent in lower-cost states, then relocating may dovetail nicely with business strategy… not just tax strategy.
From my experience: the “right” time to move is when you have a business inflection point (raising capital, expanding, exiting) that allows you to reset your structure. If you wait too long, you may have layered legacy costs and operational inertia that make change painful.
One of my clients moved just ahead of a planned capital raise; that one decision saved six-figures in state taxes over the next five years.
There is no clear cut answer here… the only thing that can truly guide you is to way the pro’s and con’s of such a massive change in scenery and situation.
Pulling It All Together
Relocating from California to Florida or Texas is more than a lifestyle tweak — it’s a strategic tax and business-structure decision. From my vantage working with business owners: when done thoughtfully, the tax benefits can be real and compounding. But done hastily, you may end up with business disruption or unexpected state tax claims.
If you’re evaluating this move, here’s what I recommend: clarify your personal income flows, evaluate how your business currently ties into California (and whether you can shift them), document your move and new domicile diligently, and time key asset sales or business events around the transition.
You might think you’re just seeking sunshine (and you are in one sense) but you’re also setting the foundation for decades of more efficient tax-aware growth.
If you’d like to talk through whether your business qualifies for meaningful savings by relocating (and what that might look like), feel free to schedule a consultation today.
Welcome to the New Age of Accounting. Let’s begin.
P.S. If you found this article helpful, you’ll love my new book S-Corp Mastery: How Smart Business Owners Maximize Tax Savings & Build a Lasting Legacy. It’s now live and available in a sleek, easy-to-read PDF version. Grab your copy here
Chris is the Managing Partner at Weston Tax Associates, a best-selling author, and a renowned tax strategist. With over 20 years of expertise in tax and corporate finance, he simplifies complex tax concepts into actionable strategies that drive business growth. Originally from Sweden, he now lives in Florida with his wife and two sons.
