Domesticating, Relocating, or Converting a California LLC to a Florida LLC to Pay Less on Taxes

Relocating, Domiciling, Transferring, or Converting a California LLC to a Florida LLC

Updated: April 7, 2023
Reading Time: 10 Minutes

Objectives:

• Domicile a California Limited Liability Company (LLC) to Florida;
• Maintain the same EIN and identity of the LLC; and
• Enjoy tax benefits provided to Florida residents.

Entities:

• California Limited Liability Companies (LLCs)

Table of Contents

• What is a Conversion or Domestication?
• Does California Allow LLCs to Move Out of State?
• Is My California Entity Dissolved?
• Do I Need To Get a New EIN if I Domesticate My Company to Florida?
• How Does FL Patel Law PLLC Convert My California LLC to a Florida LLC?
• How Long Does It Take To Complete a Domestication or Conversion to the State of Florida?
• What Are the Costs Involved in Domesticating My California LLC to the State of Florida?
• What Are Some of the Risks Associated With a Conversion Gone Wrong?
• Increase Your Chances of a Successful Conversion
• What Are the Benefits of Converting My California LLC to a Florida LLC?
• What Are the Tax Implications of Converting My California LLC to a Florida LLC?
• Should I Work With Attorney Patel to Convert My California LLC to a Florida LLC?

If you’re interested in moving your company to Florida, then you’re not alone. Many businesses from California are considering moving their businesses to Florida to take advantage of the State’s friendly business policies, zero state income taxes, and more. This is done by undertaking a corporate transaction called statutory conversion, which legally changes your California LLC to a Florida LLC.

Converting a California LLC to a Florida LLC may seem like a daunting task, but FL Patel Law PLLC’s guidance can make all the difference and help ensure a seamless transition. Our firm has successfully reorganized over 140 businesses into Florida entities, providing us with the necessary insight to prepare them for success in their new state.  

In this article, we’ll go over our firm’s process for converting a California LLC to a Florida LLC and explain how working with our legal team can save you time, money, and prevent potential legal troubles. We’ll also touch on some of the risks associated with an incorrectly executed conversion and what an attorney can do to help you avoid those pitfalls and complications.

Failing to follow these requirements to the letter can lead to disastrous consequences. Certain mistakes could even inadvertently liquidate your business. Our firm guides our clients through each step while diligently minimizing delays and complications while also ensuring legal and tax compliance.  Read more below on the risks associated with not doing a conversion properly.

A statutory conversion is a process that allows a company to change from a California LLC to a Florida LLC.

This process is often referred to as “domestication,” “conversion,” or “transfer” when the entity is converting to a different state. These terms can often be used interchangeably.

It allows a business to change its formation state without the need to dissolve the existing entity or create a new one. This can help minimize disruptions to the business and preserve important relationships, contracts, and licenses. The process also allows a California LLC to continue its business operations in the new state, as well as retain its rights, assets, privileges, and liabilities.

An LLC that was formed in California and domesticates or converts to an LLC in Florida will now be regulated by the Florida Revised Limited Liability Company Act instead of the California Revised Uniform Limited Liability Company Act, unless the LLC has a Foreign Qualification that allows it to do business in California. This is something to discuss with our attorney.

Yes. In California, the legislature has passed California Revised Uniform Limited Liability Company Act (“CRULLA”) that expressly allows a limited liability company formed in the State of California to convert into a Florida limited liability company. See  Cal. Corp. Code § 17710.02. California corporations have a similar process available to them known as domestication.

No! Dissolving your entity means that it will no longer exist. There are a lot of articles on the internet that instructs a reader to dissolve their entity. This is incorrect and misleading, as you should never dissolve your company unless you want to close your company. If your company has conducted the transaction properly, when someone looks up your company on the California Secretary of State’s website, it will say “Converted Out”.

This is usually on a case by case basis. The EIN is issued by the Internal Revenue Service (IRS), they have provided if you generally conduct a statutorily conversion, without any other changes, you would retain your EIN as it is the same business as it’s continuity is retained. Continuity of your business is very important if you want to keep the same EIN.

The conversion process demands a sequence of processes that all conversions must follow. Below is a general outline of how we help our clients domesticate their California LLC to Florida. Keep in mind this is general advice and not for your specific situation. Please schedule a consultation with our attorney for your guidance related to your company’s unique circumstances.

When our firm is hired to convert a California LLC to a Florida LLC, we begin by conducting an initial assessment of the client’s business to confirm if conversion is the best option for relocating the company. Understanding their operations and their motivations for domesticating to Florida enables us to identify potential issues before they arise. It also gives us the information that we need to build a personalized strategy for transitioning the company from a California LLC to a Florida LLC. 

We provide comprehensive support throughout the conversion process that includes:

• Drafting the Plan of Conversion and other required documents
• Ensuring compliance with the laws and other legal requirements in both states
• Filing the necessary documents with California and Florida state agencies
• Updating the LLC’s operating agreement and other corporate documents to reflect its conversion from a California LLC to a Florida LLC
• A comprehensive consultation to address final concerns and questions

Thanks to our firm’s experience, you can expect your business’s conversion from a California LLC to a Florida LLC to take about two to three months with us managing the process. Our refined and efficient approach expedites filings whenever possible, resulting in the fastest possible completion time. If you ever come across someone that says it can be done sooner, they may not be engaging in a conversion process and are likely dissolving and starting a new company.

State agencies responsible for conversions often face backlogs, short staffing, and other delays. Each agency will typically need several weeks of processing time. This means that even small mistakes can delay your LLC’s domestication. Paying additional filing fees for corrected documents can be as expensive as it is frustrating, too. That’s why it’s crucial to work with an attorney who can help minimize the risk of errors that could jeopardize your business.

The filing fees to move a California LLC to Florida are different for each state. California’s filing fee for conversion documents is $30.00 and Florida’s is $155.00. Total filing fees for both states amount to $185.00. This, however, is just the start. There will almost certainly be other costs involved in domesticating the business, especially if mistakes are made during the conversion process.

We provide flat fees for domestication projects for our clients. The costs will vary for each client depending on the complexities of their own unique situation. Schedule an initial consultation with our attorney to review your project and get a quote. We handle domestication for our clients for both states and make everything as easy as possible while minimizing disruptions.

Converting a California LLC to a Florida LLC is a complex process that requires great attention to detail and a deep understanding of the laws in both states. However, working with an attorney can go a long way in avoiding the kinds of costly mistakes that could threaten your business’s very existence.

Some of the general risks of attempting the conversion process on your own without the proper legal guidance include:

• Noncompliance with state laws
• Revocation of the LLC’s operating authority
• Damaged credit standing
• Damaged relationships with clients and vendors
• Disrupted contracts
• Loss of business continuity
• Loss of limited liability protection
• Tax implications and increased tax liabilities
• Legal disputes
• Dissolution or liquidation
• Missed opportunities
• Expensive fines
• Painful delays
• Taxes on Appreciated Assets – Depending on the LLC’s tax structure, its members could end up paying income taxes on appreciated assets if they make any errors during the conversion process. For instance, if an asset that was worth $100,000 at the company’s founding is now worth $1 million, and the company is mistakenly dissolved or liquidated, then the members could be taxed on the gained value. 
  
• Title of Asset Issues – Another benefit of converting a California LLC to a Florida LLC is that asset titles will automatically transfer over to the domesticated entity – that is, assuming the conversion process was handled correctly. This can make it difficult to prove ownership of those assets, which can cause major headaches when trying to sell a company, among other problems.

These are just some of the issues that can arise due to a defective conversion.

With over 140 business conversions and domestications to our credit, our firm’s proven track record means that you can rest easier knowing that your interests are in safe hands when we’re the ones in charge of converting your California LLC to a Florida LLC.

Don’t leave the success of your California LLC conversion up to chance. Hiring a firm as experienced as ours is the best way to ensure that everything runs smoothly when converting a California LLC to a Florida LLC.

1. Our clients enjoy the benefits of Florida law by avoiding any need to file documents in California ever again. If your company is no longer doing business in California after converting from a California LLC to a Florida LLC, you will no longer have a nexus in that jurisdiction.

2. Converting a California LLC to a Florida LLC opens you up to working with Florida professional accountants, attorneys, and other service providers that know and live Florida LLC and business law.

3. A seamless transition from California to Florida without business interruptions. 

4. Our client’s Florida Articles of Organization will effortlessly replace their original California founding documents. All LLC powers remain LLC powers, along with rights, benefits, exemptions, privileges, and principles.  

5. All owners will retain their initial membership interests after converting the California LLC to a Florida LLC. Real estate and other property rights will also transfer to the Florida LLC after conversion. However, make note that any liabilities of the LLC will remain unaffected by the Florida conversion, as will any pending lawsuits. Any pending legal procedures or actions can be substituted with the name of the Florida LLC.  

6. The company’s owners don’t have to live in Florida after converting a California LLC to a Florida LLC. 

7. As an LLC owner moving to Florida, you will no longer be required to have a taxable connection (nexus) with the original state of your LLC. Moving to Florida will save you state income taxes and/or other LLC taxes in your old state. Check with your tax professional for more guidance on taxes, as it is unique to each business. 

8. Domestication doesn’t change the LLC’s EIN. The LLC continues to exist and report taxes as it always did. All that changes is the domicile of your LLC. 

9. Converting a California LLC to a Florida LLC allows the business to keep the same bank accounts, the same taxpayer ID, the same operations, and the same contracts. Depending on the size and complexity of the business, careful planning should be undertaken before engaging in domestication or conversion.

There may be tax implications to be aware of when converting a California LLC to a Florida LLC, the specifics of which will vary from business to business. Our legal team can help you navigate some of these changes, but it’s essential to discuss this matter with your tax professional if you want to stay on the right side of the IRS. Some common issues to consider bringing up are:

• State Income Tax: California has a state income tax, while Florida does not. While this won’t impact federal taxes, this means that the company may be able to save on state income taxes after converting from a California LLC to a Florida LLC.

• Franchise Tax: California imposes a franchise tax on LLCs, but Florida does not impose a franchise tax on LLCs. The LLC will need to close its account with the California Franchise Tax Board and file final returns if required.

• Nexus: If your business continues to have a nexus in California, then it may still need to comply with that state’s tax laws after converting. Nexus is generally established when a company has a physical presence, employees, or substantial activities in a given state.

Hiring our firm to convert a California LLC to a Florida LLC enables our clients to benefit from Attorney Patel’s valuable guidance and wealth of information. They also receive a post conversion checklist and instructions to help them adapt to their new responsibilities as Florida business owners.

Finally, our corporate attorney will sit down for a consultation to address any remaining questions that they might have about owning an LLC in Florida. Remember that, as a corporate law firm, we offer a suite of services to support our clients that could prove useful, if not necessary, to running a business in Florida.

The potential dangers involved in converting your own California LLC to a Florida LLC should be averted at all costs. By trusting your conversion to our Florida corporate law attorney, you’ll have more time and energy to focus on running your business while we tackle the legal complexities of its relocation. Schedule with us and get started today.

Is your California LLC ready for a new start on the east coast? Don’t risk breaking your business’s stride — get assistance from an experienced business conversion attorney by scheduling online or calling (727) 279-5037.

Image Source: San Francisco California from Pixabay.