Can You Domesticate or Convert a Texas LLC to a Florida LLC?
Relocating, Domiciling, Transferring, or Converting a Texas LLC to a Florida LLC
Updated: May 8, 2023
Reading Time: 10 Minutes
- Domicile a Texas Limited Liability Company to Florida;
- Maintain the same EIN and identity for the LLC;
- Enjoy tax benefits provided to Florida residents.
- Limited Liability Companies (LLCs)
Table of Contents:
- What is a Conversion or Domestication?
- Does Texas Allow LLCs to Move Out of State?
- Is My Texas Entity Dissolved?
- How Does FL Patel Law PLLC Convert My Texas 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 Texas 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 Texas LLC to a Florida LLC?
- Should I Work With Attorney Patel to Convert My Texas LLC to a Florida LLC?
Texas LLC owners might find it advantageous to relocate their businesses to Florida for a number of reasons, such as our pro-business policies and world-class scenery. Like Texas, our state doesn’t impose an income tax on its residents, either. Changing a Texas LLC to a Florida LLC is possible through a statutory conversion.
Although converting a Texas LLC to a Florida LLC is a challenge that presents a series of hazards to those without legal expertise, FL Patel Law PLLC’s guidance can make all the difference by helping to ensure an easy, seamless transition. Our firm has successfully reorganized over 140 businesses into Florida entities, giving us the necessary experience and insight to prepare them for prosperity in the Sunshine State.
In this article, we’ll review our firm’s process for converting a Texas LLC to a Florida LLC. We’ll also take a moment to go over some potential dangers that can come about from improperly executing a conversion, as well as how our attorney can help you avoid these risks and protect your business.
Failing to strictly comply with the statutory requirements mandated by both Texas and Florida can spell disaster for you and your business. In fact, some mistakes could even dissolve your company, leading to harsh tax implications. When overseeing a conversion, our clients benefit from our assistance with navigating these requirements and other compliance matters, as well as our dedication to minimizing delays and protecting their business’s continuity.
What is a Conversion or a Domestication?To top
Statutory conversion is a method available under Florida law for changing a Texas LLC to a Florida LLC.
This process is known as “domestication,” “conversion,” or “transfer” when the entity is relocating to a new state. These terms are often used interchangeably.
Using a statutory conversion to change an LLC’s formation state allows it to relocate without dissolving and starting over as a new entity. Our clients often appreciate that it minimizes disruptions and preserves important relationships, contracts, and licenses. Converting a Texas LLC to a Florida LLC also lets the company keep the same rights, assets, privileges, and liabilities that it did in its original state.
After converting from a Texas LLC to a Florida LLC, the business will fall under the jurisdiction of the Florida Revised Limited Liability Company Act. It may also need to keep following the Texas Limited Liability Company Act and other Texas laws if it continues to have a nexus (taxable connection) and/or a foreign qualification back in the Lone Star State. Be sure to discuss this with our attorney.
Does Texas Allow Limited Liability Companies (LLCs) to Move Out of State?To top
Yes, as of the date of this article, it is possible to transfer a Texas LLC to the state of Florida under Chapter 10, Subchapter C, Section 10 of the Texas Business Organizations Code.
Sec. 10.101. CONVERSION OF DOMESTIC ENTITIES. (a) A domestic entity may convert into a different type of domestic entity or a non-code organization by adopting a plan of conversion.
(b) To effect a conversion, the converting entity must act on and the owners or members of the domestic entity must approve a plan of conversion in the manner prescribed by this code for the approval of conversions by the domestic entity or, if not prescribed by this code, in the same manner as prescribed by this code for the adoption and approval of a plan of merger by the domestic entity when the domestic entity does not survive the merger.
(c) A domestic entity subject to dissenters’ rights must provide the notice required by Section 10.355.
(d) A conversion may not take effect if the conversion is prohibited by or inconsistent with the laws of the converted entity’s jurisdiction of formation, and the formation, incorporation, or organization of the converted entity under the plan of conversion must be effected in compliance with those laws pursuant to the plan of conversion.
(e) At the time a conversion takes effect, each owner or member of the converting entity, other than those who receive payment of their ownership or membership interest under any applicable provisions of this code relating to dissent and appraisal, has, unless otherwise agreed to by that owner or member, an ownership or membership interest in, and is the owner or member of, the converted entity.
(f) A domestic entity may not convert under this section if an owner or member of the domestic entity, as a result of the conversion, becomes subject to owner liability, without the consent of the owner or member, for a liability or other obligation of the converted entity.
Is My Texas Entity Dissolved?To top
No. Dissolving your business could disrupt your efforts to convert it from a Texas LLC to a Florida LLC and will cause its liquidation. Our firm has found an unfortunate number of websites that claim that dissolution is a required step in relocating a business to Florida, but this just isn’t true. We only recommend dissolving a business when its owners are ready to shut it down permanently.
Do I Need To Get a New EIN if I Domesticate My Company to Florida?To top
Each business’s EIN is issued by the IRS for identification purposes. According to them, companies that go through a statutory conversion and don’t make any other changes to their business can continue using their original EIN, as it’s still the same identity that existed in its previous jurisdiction. However, this will ultimately be determined on a case-to-case basis.
If you want to keep using the same ein for your LLC, then it’s of the utmost importance that you ensure its continuity during the move. Hiring an attorney to convert your Texas LLC to a Florida LLC will go a long way towards avoiding the kinds of mistakes and errors that could cost your business its corporate identity, along with other consequences.
How Does FL Patel Law PLLC Convert My Texas LLC to a Florida LLC?To top
Our firm begins the conversion process by reviewing the client’s business and its operations. This step ensures that conversion is the best option for them, helps identify potential problems before they arise, and also gives us the information that we need to build a personalized strategy for transitioning from a Texas LLC to a Florida LLC. This review includes looking into the company’s formation documents and tax structure, Texas and Florida’s conversion requirements, and the possible tax implications that could come about after relocating.
When you hire our firm for your conversion project, we begin by reviewing the business and its operations. This step ensures that conversion is the best option, helps identify potential problems before they arise, and also gives us the information that we need to build a personalized strategy for transitioning the entity from a Texas LLC to a Florida LLC. This review includes looking into the company’s formation documents and tax structure, Texas and Florida’s conversion requirements, and the possible tax implications that could come about after relocating.
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 Texas and Florida state agencies
- Updating the LLC’s operating agreement and other corporate documents to reflect its conversion from a Texas LLC to a Florida LLC
- A comprehensive consultation to address final concerns and questions
How Long Does It Take To Complete a Domestication or Conversion to the State of Florida?To top
Most business owners who use our firm to convert a Texas LLC to a Florida LLC can expect the project to be done within about two or three months. After handling over 140 domestications and conversions for clients from across the country, we’ve developed a refined, efficient process for domiciling businesses to Florida that expedites filings at every opportunity. We’re positive that this is the fastest possible timetable for making this happen.
Because of backlogs, short staffing, and other delays, state agencies in Texas, Florida, and in most other states require several weeks to process the conversion paperwork that we send to them. This means that mistakes in filing could set back an LLC’s conversion efforts by weeks or even months in addition to the accumulating filing fees. This is another reason why hiring an attorney to manage converting a Texas LLC to a Florida LLC is strongly advisable, as errors could even result in the liquidation of the LLC.
What Are the Costs Involved in Domesticating My Texas LLC to the State of Florida?To top
Florida charges a $155.00 filing fee to convert a Texas LLC to a Florida LLC, while the filing fee for Texas is $300.00. This adds up to a total of $455.00. There will likely be additional costs for relocating your business as well. Remember that filing mistakes could require you to pay those fees all over again, in addition to possibly throwing your business out of regulatory compliance or even initiating its dissolution.
FL Patel Law PLLC provides domestication projects on a flat-fee basis. The exact cost is personally tailored towards each client’s company and unique circumstances. Schedule an initial consultation with Attorney Patel to review your project and get a quote for your conversion. We handle conversions for clients in both states with a focus towards efficiency and minimizing potential interruptions.
What Are Some of the Risks Associated With a Conversion Gone Wrong?To top
Trying to convert a Texas LLC to a Florida LLC without a comprehensive understanding of the laws in both states can be a recipe for disaster. It’s a complex project that demands great vigilance and attention to detail, but an attorney’s guidance can help guarantee a successful transition free from delays and missteps.
Some of the countless risks of converting your LLC without an attorney’s guidance include, but are not limited to:
- 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 Texas 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 consequences that could impact your business if you make any mistakes during the conversion process. Don’t forget that an attorney’s help can make all the difference when it comes to preventing these problems and more.
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 Texas LLC to a Florida LLC.
Increase Your Chances of a Successful ConversionTo top
The potential risks involved with converting your own company often outweigh any would-be benefits. Mistakes can lead to heavy penalties for both yourself and your business. Working with our firm is the best way to protect your business’s interests – and your own – when converting a Texas LLC to a Florida LLC.
What Are the Benefits of Converting My Texas LLC to a Florida LLC?To top
1. The LLC might be able to break its economic nexus in Texas if it ceases doing business there after it converts to a Florida entity. Without a nexus, your business might no longer need to file with the State of Texas again.
2. Converting a Texas LLC to a Florida LLC opens you up to team-up with other professionals, such as accounts, lawyers, and other in-demand professionals, who call Florida home.
3. Using statutory conversion allows the Texas LLC to move to Florida without interrupting the company’s continuity or its ability to do business.
4. The converted entity’s new Florida Articles of Organization replace the original Texas formation documents without interruption. The business will have all the same powers, rights, benefits, privileges, exemptions, and principles that it did prior to the conversion as well.
5. Membership interest in the LLC also stays the same when converting a Texas LLC to a Florida LLC, as will any property rights like real estate. Pending lawsuits and liabilities, too, will follow the business to Florida, although the converted entity’s name may be used in place of the old one.
6. You are not required to live in Florida in order to convert a Texas LLC to a Florida LLC.
7. Converting an LLC to Florida often removes the business’s taxable connection, known as a nexus, to Texas. Talk to your tax advisor about this, as the specifics will change from business to business.
8. The domesticated LLC can continue using the Texas LLC’s EIN for taxes and reporting. It’s the same entity that existed before. Only its domicile has changed.
9. Converting a Texas LLC to a Florida LLC also lets the business keep the same bank accounts, taxpayer ID, operations, and contracts. Plan your domestication carefully, as mistakes made while converting to Florida could delay your relocation or come with other undesirable penalties.
What Are the Tax Implications of Converting My Texas LLC to a Florida LLC?To top
Most businesses converting from a Texas LLC to a Florida LLC can expect there to be tax implications that come about from their move. Because of this, consulting with a tax professional is essential to ensuring proper compliance with state governments, the IRS, and other regulatory bodies. The specifics will be unique to every business, but here are few items that you can discuss when planning your relocation efforts:
- State Income Tax: Florida, like Texas, does not have a state income tax, so you won’t need to worry about increased expenses in this area.
- Sales Tax: Florida only has a state sales tax, whereas Texas allows local jurisdictions to impose additional sales and use taxes on top of that levied by the state up to a maximum of 8.25%. After converting, the business needs to register with the Florida Department of Revenue and pay any required sales taxes.
- Franchise Tax: In Texas, businesses with more than $1.18 million in annual receipts are required to pay franchise tax unless they have an exemption. Florida, on the other hand, has no franchise tax whatsoever. After converting from a Texas LLC to a Florida LLC, the company will need to close its account with the Texas Comptroller of Public Accounts and file any necessary final returns.
- Nexus: Although economic nexus is sometimes removed when converting a Texas LLC to a Florida LLC, businesses should not take this as a given. If the converted entity still does business in Texas or otherwise maintains a nexus, then it will need to keep following the tax laws in that state. Again, we strongly suggest discussing this with your tax advisor.
Should I Work With Attorney Patel to Convert My Texas LLC to a Florida LLC?To top
Another aspect of our firm’s conversion service that is appreciated by many of our clients is the guidance we give them for their LLC’s new life in Florida. After relocating, the client is given a checklist with next steps and instructions for adapting to their new responsibilities, which include closing out old tax accounts and opening new ones.
After the LLC has been successfully converted, the client also has the opportunity to ask our corporate law attorney any questions they might have about the move. Remember that, as a corporate law firm, we offer a suite of services that could prove useful, if not necessary, to running a business in Florida.
Attempting to convert your own Texas LLC to a Florida LLC without legal guidance will only expose you to unnecessary risks and potential liability while also putting your entity’s future in danger. 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 now to get started.
Are you ready to trade in Tex-Mex for Cuban cuisine and move down to 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.
Image by Micah Boswell from Unsplash.