How Business Owners Are Packing Up And Moving Their Companies To Florida
Can you legally change your business' original location to Florida?
Several states allow for re-domestication of an LLC, which is the process of changing a company’s domicile or location. Each state has their own set of rules for this process, as well as the legal consequences and potential tax ramifications. As of now, only 17 states allow for re-domestication or re-domiciling. Florida seems to be the most popular choice and classifies these transactions as conversions only.
What is a conversion?
Conversion is the process of a business changing its domicile from one state to another, fully relocating to the new state. It's important to note that the converted business then becomes subject to the laws of its new location.
For example, Florida law allows a California LLC to re-domicile through conversion, where the governing law for the business becomes Florida.
Why Florida?
In the last year, we have seen a boost in both large and small businesses relocating to Florida. The reasoning for this may have to do with the economy and the warm climate. However, one of the most important reasons is the tax incentive.
For many, a corporate relocation to Florida can effectively reduce taxes, while keeping much of their company account information the same. After converting, the Florida LLC may keep, maintain and use the same bank accounts, federal tax ID number and form, credit rating and previous business relationships.
Step #1: Find out if you are eligible.
The most important note regarding conversions is that the limitations vary from state-to-state and by business type. Many states permit the conversion of some businesses, subject to certain conditions, while other states do not allow conversion at all.
So, you need to find out (1) if the state where your company was originally formed allows a company to convert to another domicile and (2) if the destination state allows for conversion.
If the answer to either of these questions is “no,” then conversion is not applicable and the business must find another option. For example, a California business can convert to Florida, but a New York business cannot easily convert to Florida.
Step #2: Prepare a plan for conversion.
In addition to other documents, both California and Florida require a plan of conversion.
Each plan of conversion is an internal company document and should not be filed or be made publicly available. The document may also be subject to subpoena.
To streamline things, the LLC in question can prepare a single plan of conversion that satisfies both Florida’s and California’s requirements.
Step #3: Prepare & file articles of conversion.
After all of the California LLC’s members approve the plan of conversion, the document must be prepared and filed with Florida’s Department of State Articles of Conversion for Other Business Entity’ into Florida Limited Company. The details of the "new" Florida LLC must be outlined, such as the identities and addresses of the Florida LLC’s managers and its members. Each member of both LLCs must sign the plan of conversion for the new LLC, as well as a unanimous member consent approving the conversion.
Step #4: Prepare & file a certificate of conversion.
Once the conversion has been completed and approved in Florida, the California LLC needs to file a Certificate of Conversion with California’s Secretary of State.