Can You Relocate or Convert a Michigan LLC to a Florida LLC?
Relocating, Domiciling, Transferring, or Converting a Michigan LLC to a Florida LLC
Updated: March 17, 2023
Reading Time: 10 Minutes
- Domicile a Michigan Limited Liability Company (LLC) to Florida;
- Keep the same EIN and identity of the LLC;
- Enjoy tax benefits provided to Florida residents;
- Limited Liability Companies (LLCs)
Table of Contents
- What is a Conversion or Domestication?
- Does Michigan Allow LLCs to Move Out of State?
- What are the Benefits and Effects of Converting an LLC?
- How Do I Convert My Michigan LLC to a Florida LLC?
- How Long Does it Take To Complete a Domestication or Conversion to the State of Florida?
- Can I Dissolve My Entity in the State of Michigan?
- What Are the Tax Implications of Converting My Michigan LLC to a Florida LLC?
- Should I Work with a Lawyer to Convert My Michigan LLC to a Florida LLC?
Michigan LLC owners could greatly benefit from relocating their businesses to Florida, as our state imposes no income tax and is unapologetically pro-business in its policies. This can be accomplished through “statutory conversion,” which is a type of corporate transaction under Florida law.
Converting a Michigan LLC to a Florida LLC changes the company’s domicile and identity at the state level while preserving that identity for federal tax purposes. Our conversion and domestication clients often want a way to move their companies that won’t interrupt their ability to do business or force changes to their corporate identity. Converting a Michigan LLC can be complicated and take up a lot of time and energy but can be worth the effort for many businesses.
Here, we’ll review the steps our firm takes to convert a Michigan LLC to a Florida LLC, some things to consider before and after domesticating to Florida, and a few issues that might come up along the way.
Before converting a Michigan LLC to a Florida LLC, we strongly recommend speaking to a conversion & domestication attorney and/or tax advisor about your plans. This type of transition can expose both you and your company to unnecessary risks, including noncompliance with state laws and regulations, legal penalties, and financial losses. In other words, even simple mistakes can lead to delays and other unpleasant consequences.
What is a Conversion or Domestication?To top
Conversion is a process under the Florida statutes that allows the conversion of a Michigan LLC to a Florida LLC. When converting to a different state, the process is sometimes called “domestication” instead. It’s often advantageous because it lets a business switch out its formation state without requiring it to dissolve and start over from scratch. This minimizes the chance of disruptions, and helps preserve important relationships, contracts, and licenses. When converting to Florida, the LLC can keep doing business and will also retain its rights, assets, privileges, and liabilities.
Michigan LLCs converting to Florida LLCs are governed by the Florida Revised Limited Liability Company Act after their domestication. However, if the business has a foreign qualification in Michigan, then it may still need to follow the Michigan Limited Liability Company Act as well. Be sure to discuss this with your attorney.
Does Michigan Allow LLCs to Move Out of State?To top
Yes. As of the date of this article, it is possible to convert a Michigan LLC to a Florida LLC under Section 450.4708 of the Michigan Limited Liability Company Act under the Michigan Compiled Laws.
Sec. 708. (1) A domestic limited liability company may convert into a business organization if all of the following requirements are satisfied:
(a) The conversion is permitted by the law that will govern the internal affairs of the business organization after conversion and the surviving business organization complies with that law in converting.
(b) Unless subdivision (d) applies, the domestic limited liability company proposing to convert adopts a plan of conversion that includes all of the following:
(i) The name of the domestic limited liability company, the name of the business organization into which the domestic limited liability company is converting, the type of business organization into which the domestic limited liability company is converting, identification of the statute that will govern the internal affairs of the surviving business organization, the street address of the surviving business organization, the street address of the domestic limited liability company if different from the street address of the surviving business organization, and the principal place of business of the surviving business organization.
(ii) The terms and conditions of the proposed conversion, including the manner and basis of converting the membership interests of the domestic limited liability company into ownership interests or obligations of the surviving business organization, into cash, into other consideration that may include ownership interests or obligations of an entity that is not a party to the conversion, or into a combination of cash and other consideration.
(iii) The terms and conditions of the organizational documents that are to govern the surviving business organization.
(iv) Any other provisions with respect to the proposed conversion that the domestic limited liability company considers necessary or desirable.
What are the Benefits and Effects of Converting My LLC?To top
1. Michigan LLCs that stop doing business in Michigan after converting to Florida LLCs don’t have to file with the State of Michigan if they no longer have a nexus in that location.
2. Relocating to the Sunshine State means that our clients can network with local professionals, such as attorneys and other in-demand service providers, that know and live Florida LLC and business law.
3. Relocate from Michigan to Florida uninterrupted and safe from threats to your business’s continuity by using statutory conversion or domestication to facilitate its relocation.
4. The LLC will retain its powers, rights, benefits, exemptions, privileges, and principles when converting to Florida. The company’s new Florida Articles of Organization also replace the initial Michigan founding documents without any need to pause for a transition period.
5. The LLC’s members can keep the same amount of interest in the company. Property rights such as real estate carry over to the converted entity. Pending lawsuits and liabilities against the Michigan LLC also continue uninterrupted, although the Florida LLC’s name may be substituted in for clarification.
6. You do not need to reside in the State of Florida after converting your Michigan LLC.
7. Many Michigan LLCs that move to Florida can sever their taxable connection (nexus) to their home state, potentially lowering what’s paid on state income taxes. Other taxes could be impacted as well, so talk to your tax professional for guidance and advice on these matters.
8. Domesticated LLCs are the same entity that existed in their previous state and can keep using the same EIN. Tax reporting duties will not be impacted by converting the Michigan LLC to Florida, as its domicile is all that changes.
9. Michigan LLCs that have converted to Florida can continue using the same bank accounts, taxpayer ID, operations, and contracts. However, careful planning should be done before domesticating or converting a business to prevent potential errors or other problems.
How Do I Convert My Michigan LLC to a Florida LLC?To top
Domesticating or converting a Michigan LLC to a Florida LLC can present certain challenges. Even if the business is on the smaller side, its owners need to consider the legal, tax, and other implications that could result from the move. These risks, which include both legal and financial consequences, can be minimized by working with attorneys and tax professionals.
Converting a Michigan LLC to a Florida LLC is accomplished through a series of filings. Here is a general overview of what you can expect from our firm when you hire us to convert a Michigan LLC to a Florida LLC.
1. Initial Assessment. We begin by reviewing our client’s business and operations, which includes going over their formation documents and tax structure. This lets us plan out how we can help them achieve their goals for domesticating their Michigan LLC to a Florida LLC. It also ensures that it’s a good option for them, too. At this stage, we also identify the conversion requirements under both Michigan and Florida law, the move’s tax implications, and potential obstacles to domiciling the business.
2. Drafting the Plan of Conversion. Once we know our client’s business, we start drafting their Plan of Conversion. This document states the requirements for conversion under Michigan and Florida law, how to structure the transaction for tax purposes, who the LLC’s owners are, and what will happen with each member’s interest in the company. It must also satisfy any and all other requirements under the law in both states.
3. Plan of Conversion Approval. To be valid, the Plan of Conversion then needs to be approved by the Michigan LLC’s members in accordance with Michigan’s Limited Liability Company Act and/or the company’s operating agreement.
4. Drafting Documents for the State of Michigan. After the Michigan LLC’s members have approved the Plan of Conversion, we can prepare a Statement of Conversion for the State of Michigan. This filing will inform them that the converting Michigan LLC will no longer be doing business in that area.
5. Drafting Documents for the State of Florida. A Statement of Conversion will also be prepared for the State of Florida stating that the converting Michigan LLC is now registered to do business in our state. It also includes the company’s new Florida Articles of Organization which will serve as the business’s new charter under Florida law.
6. Filing Domestication Documents in Both States. After the documents are prepared and the members have all given their go-ahead for the conversion, we start filing with the State of Florida. The Michigan filings are taken care of after the State of Florida has had time to process the paperwork. Processing time is about 6 to 8 weeks for each state.
7. Paying Required Domestication Fees. The fees for converting a Michigan LLC to Florida come to a total of $205.00. Florida’s filing fee comes to $155.00, while Michigan’s is $50.00.
8. Post Conversion/Domestication. Our firm also updates our client’s corporate documents after converting their Michigan LLC to a Florida LLC. These documents include the LLC’s operating agreement, trademark registrations, and foreign qualifications.
9. Attorney Consultation. Finally, we give our clients a follow-up checklist with next steps and instructions for their post-conversion responsibilities. This list serves as an introduction to owning a Florida LLC and goes over important tasks like closing out old tax accounts and opening new ones. Our attorney reviews this list with our client and addresses any concerns or follow-up questions.
How Long Does It Take To Complete a Domestication or Conversion to the State of Florida?To top
Because of our firm’s experience in this field, it should only take about two or three months to convert a Michigan LLC to a Florida LLC. We expedite filings whenever we can, but the time that it takes for each state to process those filings means that this is the fastest timeline possible.
Managing your Michigan LLC conversion on your own or handing the project off to inexperienced professionals makes mistakes more likely, which can lead to costly delays. When domiciling a business to Florida, time is of the essence, so it’s important to get things right on the first try. A trusted business attorney can assist with this and help convert your business as quickly as possible.
Can I Dissolve My Entity in the State of Michigan?To top
No. Despite the incorrect advice found on too many other websites, dissolving a business is not a part of converting a Michigan LLC to Florida. All dissolution will accomplish is liquidating the company, which could delay or disrupt any efforts to relocate it to Florida.
What Are the Tax Implications for Converting My Michigan LLC to a Florida LLC?To top
Converting a Michigan LLC to a Florida LLC can come with tax implications. The specific implications depend on your business, but some potential changes to be aware of include:
- State Income Tax: Michigan levies a state income tax on its residents, but Florida does not. This could lead to savings on state income taxes on profits earned in Florida. However, federal income taxes will be unaffected.
- Nexus: Even if your LLC has converted and registered with the State of Florida, it may still be subject to Michigan tax laws if it still has a “nexus” in its original state. A nexus exists in any state where a business has a physical presence, employees, or otherwise conducts substantial activities. Remember this when deciding whether the LLC should keep doing business in Michigan after converting to a Florida LLC.
- EIN Number: Converting a Michigan LLC to Florida lets it keep using the same EIN (Employer Identification Number). This won’t be the case, however, if the business is dissolved. This will cause the IRS to consider it to be liquidated, which can come with tax liabilities.
Should I Work with a Lawyer to Convert My Michigan LLC to a Florida LLC?To top
Yes – finding the right counsel can make all the difference when domiciling a business to a new state. In fact, our firm has helped relocate over 140 companies to the Florida as of March 2023. These companies consist of everything from service businesses to start ups, and we would love to add your Michigan LLC conversion to Florida to our list.
Are you ready to move your Michigan LLC from the Midwest down to sunny and beautiful Florida? Don’t risk breaking your business’s stride — get assistance from an experienced business conversion attorney by calling (727) 279-5037, or if you are ready to convert, check out our service page.
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