Florida LLC Conversion and Domestication

Florida law allows an LLC that was formed in another state to relocate to Florida through a process called conversion. Conversion allows the LLC owners—called members—to change the governing law that applies to the LLC. After the conversion process is complete, the LLC is treated as though it had been originally formed under Florida law. The law of the prior state no longer governs the LLC.

Florida law allows conversions into an out of Florida. As long as conversion (sometimes called LLC domestication) is allowed by the other state, an out-of-state LLC may convert to a Florida LLC, and a Florida LLC may convert to an out-of-state LLC.¹ This article discusses the process of converting an out-of-state LLC to a Florida LLC.

Benefits of Florida LLC Conversion

When one or more LLC members move to a different state, they often want to bring their LLC with them. For these members, Florida LLC conversion has two primary benefits:

• Avoiding Multiple Filings. If an LLC was formed in one state but does business in another, the LLC must keep up with two sets of registration requirements: The general requirements of the formation state and the registration requirements of the state where the LLC does business. If the LLC members relocate to Florida, moving the LLC to Florida avoids the need to file documents in the formation state.
• Familiarity to Local Professionals. LLC members that live in Florida often want to use Florida professionals—including accountants, attorneys, or contractors—to help with the business. Having a Florida LLC allows the owners to use professionals that live in Florida and are familiar with Florida LLC law.

LLC conversion can also be useful even if the owners do not plan to move to a new state. For example, an LLC formed in another jurisdiction may want to choose to apply Florida law even if the owners do not live in Florida.

Legal Effect of Florida LLC Conversion

Converting an out-of-state LLC to a Florida LLC is a seamless process. After the conversion, the LLC is governed by Florida law, without any interruption to business operations or LLC existence. The LLC is still the same LLC; only the governing law changes.² Florida LLC conversion has the following effects:

• LLC Property Remains LLC Property. All property of the out-of-state LLC continues to be vested in the Florida LLC. There is no need to create deeds or other documents transferring property from one LLC to another.
• LLC Debts Remain LLC Debts. All debts, obligations, and other liabilities of the out-of-state LLC continue as debts, obligations, and other liabilities of the Florida LLC. The LLC owes what it owed before the conversion, and the LLC’s creditors have the same rights that they had before the conversion.
• LLC Powers Remain LLC Powers. Unless the plan of conversion (discussed below) provides otherwise—which would be unusual—the rights, privileges, immunities, powers, and purposes of the out-of-state LLC remain in the Florida LLC.
• LLC Members Remain LLC Members. The membership interests in the out-of-state LLC are converted to membership interests in the Florida LLC.
• New LLC Replaces Old LLC in Legal Proceedings. The name of the Florida LLC may be substituted for the name of the out-of-state LLC in any pending legal action or proceeding.
• Florida LLC Governing Documents Become Effective. The Florida LLC’s organic rules—the documents needed to govern the LLC, including the articles of organization and operating agreement—become effective.³

Taken together, these changes allow the LLC to make significant legal changes without disrupting the day-to-day operations of the business or rights of the LLC, its members, or its managers.

Alternatives to Florida LLC Conversion: New LLC Formation and LLC Merger

Although conversion is often the best way to move an LLC to Florida, it is not the only way. Two other alternatives should be considered:

1. New LLC Formation. Instead of converting an out-of-state LLC to a Florida LLC, the owners may simply form a new LLC and dissolve the LLC in the prior state.
2. Merger. The owners could also use the merger process to merge the out-of-state LLC into a Florida LLC. This process requires the formation of the new Florida LLC, followed by the merger of the old LLC into the new Florida LLC. The Florida LLC “survives” the merger and is the only company that remains once the merger is complete.

As a practical matter, these alternatives almost always involve more hassle and cost than an LLC conversion. They are usually used as a last resort when the law of the prior state does not permit conversion/domestication.

Terminology: Florida LLC Domestication vs. Florida LLC Conversion

Because the law of each state is different, terminology tends to vary between the states. In the LLC context, the terms domestication and conversion are often used in different ways.

What is Florida LLC Domestication?

Many states use the term domestication to refer to a statutory procedure that allows an LLC that was organized in another U.S. state to become a Florida LLC. Florida law takes a different approach. Under Florida law, domestication refers to moving a business entity that was formed internationally (a non-United States entity) to Florida.⁴ For example, domestication could be considered for moving a Mexico Limited Liability Company (called a Sociedad de Responsabilidad Limitada (S.de R.L.) in Spanish) to Florida.

What is Florida LLC Conversion?

Florida law uses the term conversion to refer to the process of moving an LLC from one U.S. state to another. ⁵ Although the procedure for Florida LLC domestication is similar to the procedure for Florida LLC conversion, the terms have different technical meanings.

Florida LLC Conversion Process: The Florida Side

The Florida Revised Limited Liability Company Act outlines a specific process that must be followed to convert an out-of-state LLC to a Florida LLC.  The Florida LLC conversion process requires a series of documents—including a plan of conversion, articles of conversion, and articles of organization—to be prepared and filed in a specific sequence.

Plan of Conversion

The first step in Florida LLC conversion preparation of a plan of conversion.⁶ The plan of conversion is a legal document that approves the conversion as an act of the LLC. Florida law requires the plan of conversion to include the following:

• The name of the out-of-state LLC;
• The name, jurisdiction of formation, and entity type of the new entity (the Florida LLC);
• The manner and basis of converting the interests in the out-of-state LLC to interests in the Florida LLC;
• The proposed articles of organization (public organic record) of the Florida LLC;
• The full text of the Florida LLC operating agreement (private organic rules) of the Florida LLC which are proposed to be in a record, if any;⁷
• Any other provision required by Florida law or the articles of organization of the Florida entity, if the entity will be an entity other than a Florida LLC (not applicable to conversions to Florida LLCs); and
• All other statements required to be set forth in a plan of conversion by the law of the state from which the LLC is moving.⁸

These requirements are minimums. The plan of conversion may include any other provision that the parties agree to, as long as it is not prohibited by law.⁹

Approval of the Plan of Conversion

The plan of conversion must be approved by each member of the out-of-state LLC that will be liable for debts, obligations, and other liabilities that arise after the conversion becomes effective unless:

• The out-of-state LLC’s formation document or operating agreement allow approval by less than all of the members; and
• Each member consented in writing (in a record) to the provision in the formation document or operating agreement that allow approval by less than all members (or became a member after that provision was already in place).¹⁰

Articles of Conversion

Once the plan of conversion is approved, the LLC must file a separate document—called articles of conversion—with the Florida Division of Corporations.¹¹ The articles of conversion must include the following information:

• The name, jurisdiction of formation, and entity type of the out-of-state LLC;
• The name, jurisdiction of formation, and entity type of the Florida LLC (i.e., a statement that it will be a Florida LLC);
• The Florida LLC’s articles of organization (as an attachment);
• A statement that the conversion was approved by the out-of-state LLC as required by the law of the prior state and by each member of the out-of-state LLC required to approve the conversion (see above);
• A statement that the Florida LLC has agreed to pay to the members of any limited liability company with appraisal rights the amount to which such members are entitled under Florida law; and
• The effective date of the conversion (if the effective date of the conversion is not the same as the date of filing of the articles of conversion).¹²

As with the plan of conversion, the articles of conversion may contain any other legal provision.¹³

Articles of Organization

As discussed above, the Florida LLC conversion process requires the owners to include a copy of the articles of organization with the plan of conversion and articles of conversion. The articles of organization are filed with the Florida Division of Corporations along with the articles of conversion.

The articles of conversion is a short document that provides information to the Florida Division of Corporations and the public. This information includes, at a minimum, the name of the LLC, its registered agent, and other basic information about the LLC. The articles of organization are discussed in detail in our article on Florida LLC formation.

Florida LLC Conversion Process: The Other Side

For an out-of-state LLC to convert to a Florida LLC, the law of the other state must permit conversion (domestication).¹⁴ If the law of the other state permits domestication (not all do), the LLC conversion documents must comply with the law of that state. The need to comply with two sets of laws—many of which use different terminology and procedures—adds complexity to the domestication process.

1. Fla. Stat. § 605.1041(1) and (3).
2. Fla. Stat. § 605.1046(1)(a).
3. Fla. Stat. § 605.1046(1).
4. Fla. Stat. § 605.0102(22).
5. Fla. Stat. § 605.0102(11).
6. Fla. Stat. § 605.1042(1).
7. The plan of conversion must include the LLC operating agreement if it is “proposed to be in a record.” Florida law uses the term record to refer to “information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.” Fla. Stat. § 605.0102(59). Under this definition, almost any LLC document is a record.
8. Fla. Stat. § 605.1042(1).
9. Fla. Stat. § 605.1042(2).
10. Fla. Stat. § 605.1043(1)(b).
11. Fla. Stat. § 605.1045(1).
12. Fla. Stat. § 605.1045(2).
13. Fla. Stat. § 605.1045(2).
14. Fla. Stat. § 605.1041(3).