Can You Domesticate or Convert a California LLC to a Florida LLC?

Can You Domesticate or Convert a California LLC to a Florida LLC?

Relocating, Domiciling, Transferring, or Converting California LLC Florida

Updated: January 21, 2023
Reading Time: 10 Minutes

Objective:

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

Entities:

  • Limited Liability Companies (LLC)

Table of Contents

  • What is a Conversion or Domestication?
  • Does California Allow LLCs to Move Out of State?
  • What are the Benefits and Effects of Converting My LLC?
  • How Do I Convert My California 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 California?
  • What is a Plan of Conversion?
  • What are Articles of Organization?
  • Should I Work with a Lawyer to Convert My California LLC to a Florida LLC?


Many business owners in California are considering moving their business to Florida to take advantage of the State’s friendly business policies, zero state income taxes, and more. It is done by undertaking a corporate transaction called “Statutory Conversion.”

In this process, a business retains its identity for federal tax purposes but changes it for state tax purposes. It also changes the domicile of your company to the State of Florida. The goal for many of our clients is to retain their same EIN number and to have as little disruption as possible to their company. The process of domesticating an LLC can be complex and time-consuming. In this article, we will discuss the steps that our firm takes to domesticate an LLC from California to Florida. We will also discuss potential challenges and considerations a business owner may want to consider before and after domesticating their California LLC to the State of Florida.

Before starting the process of converting a California LLC to a Florida LLC, it is important to discuss your project with an attorney and your tax advisor. By attempting to handle the process on your own, you may be exposing your company to unnecessary risks, such as non-compliance with state laws and regulations, legal penalties, and financial losses. A mistake made during the process can have severe consequences for your company’s future.

 Mistakes during the conversion process could cause you to lose liability protection and discourage potential investors. It can even lead to the liquidation of your company. 

What is a Conversion or a Domestication?

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A statutory conversion is a process by which a California LLC can change into to a Florida LLC while retaining its original date of formation and continuity of existence. This process is often referred to as “domestication” when the entity is converting to a different state. It allows a business to change its form without the need to dissolve the existing entity or create a new one. This can help to minimize disruptions to the business and preserve important relationships, such as contracts and licenses. This allows a California LLC to continue its business operations in the new state, as well as retain its rights, assets, privileges, and liabilities,

In other words, 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 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.

Pro Tip: Do you need a certificate of good standing from California? There are a few websites on the internet that provide you need a certificate of good standing, this is not a document we require or is necessary in order to convert the LLC, but the LLC needs to be in good standing in the State of California.

Does California Allow Limited Liability Companies (LLCs) to Move Out of State?

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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 covert into a Florida limited liability company. See Cal. Corp. Code § 17710.02.

California Revised Uniform Limited Liability Company Act § 17710.02

(a) An entity that converts into another entity pursuant to this article is for all purposes other than for the purposes of Part 10 (commencing with Section 17001), Part 10.2 (commencing with Section 18401), and Part 11 (commencing with Section 23001) of Division 2 of the Revenue and Taxation Code, the same entity that existed before the conversion and the conversion shall not be deemed a transfer of property.

(b) Upon a conversion taking effect, all of the following apply:

(1) All the rights and property, whether real, personal, or mixed, of the converting entity or converting limited liability company are vested in the converted entity or converted limited liability company.

(2) All debts, liabilities, and obligations of the converting entity or converting limited liability company continue as debts, liabilities, and obligations of the converted entity or converted limited liability company.

(3) All rights of creditors and liens upon the property of the converting entity or converting limited liability company shall be preserved unimpaired and remain enforceable against the converted entity or converted limited liability company to the same extent as against the converting entity or converting limited liability company as if the conversion had not occurred.

(4) Any action or proceeding pending by or against the converting entity or converting limited liability company may be continued against the converted entity or converted limited liability company as if the conversion had not occurred.

Cal. Corp. Code § 17710.09

What Are the Benefits of Converting My California LLC to Florida LLC?

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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, you will no longer have a nexus with California.  

2. Having an LLC in Florida gives our clients the benefit of working with Florida professional accountants, attorneys, or 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 remain in Florida.  

5. All owners will retain their initial membership interests. 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 will be substituted with the name of the Florida LLC.  

6. Owners of California LLCs that are converting to Florida LLCs do not have to reside in the state of Florida

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 and the LLC continues to exist and report taxes as it always did. All that changes is the domicile of your LLC. 

9. The same bank accounts, the same taxpayer, 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.

It’s also important to note that even if an LLC is no longer doing business in California, it may still be subject to California taxes on any income it earned while doing business in the state. Therefore, it’s important for LLCs domesticating to another state to consult with a tax professional to understand how the move may impact their tax obligations.

How Does FL Patel Law PLLC Convert my California LLC to a Florida LLC?

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Even if your business is small, domesticating or converting a California LLC to Florida LLC can be a complex process with many legal, tax, and business considerations. Engaging the services of a lawyer and a tax professional can help to ensure that the process is done correctly, and minimize the risks and potential legal and financial consequences.

The conversion process demands a sequence of documents that all conversions must follow. Below is a general outline of how we help our clients domesticate their California LLC to Florida. 

Every process has a plan, and every plan has a process to follow. The process of LLC conversion in each state is very different, as are the requirements. The laws of both states must be considered and satisfied. So, keep in mind the details may change from state to state. These are the general rules. 

1. Initial Assessment. We first review our client’s current business structure and operations to understand our client’s goals and objectives for domesticating the LLC. This helps us ensure that domestication is the best option for the client. We review formation documents, and the entities’ tax structure, take a look into the legal requirements of California and Florida, the tax implications relating to domestication, and identify other challenges and requirements relating to the client’s project.

If the name of your LLC is already in use in the state of Florida, you may need to pick new name for your entity.

1. Drafting the Plan of Conversion. After the initial assessment is done, we prepare a plan for the entire process. This plan details the specific requirements that need to be followed under California and Florida law. It also details who the owners are and what is going to happen to their membership interests. It details how the transaction should be structured for tax purposes. The entire plan needs to meet all the requirements of both states involved. See below for more details on what a plan of conversion is. 

2. Plan of Conversion Approval. The plan must be approved by the members of the California LLC in accordance with the California LLC Act and/or in accordance with the California LLC’s operating agreement.

3. Documents Drafted for State of California. We also prepare a Statement of Conversion to be filed with the State of California that informs the State of California that the LLC will no longer be doing business in the State of California.

4. Documents Drafted for State of Florida. We also prepare a Statement of Conversion that is filed with the State of Florida that provides that the California entity is registered in the State of Florida and also includes the Florida Articles of Organization with the Statement. As the entity will have a new charter under Florida law.

5. Domestication Documents Filed in Both States. Once we have all the necessary documents and consent, we first file with the State of Florida. Once the paperwork is filed in the State of Florida, we file the paperwork with the State of California. It takes each state approximately 6-8 weeks to file the paperwork. So ensuring that the paperwork is correct is crucial, as a mistake can double the time it takes to complete the process. 

6. Required Domestication Fees Paid. To move a California LLC to Florida, the fee in California would be $30.00, and in Florida, the fee would be $155.00. Total filing fees for both states amount to $185.00. 

7. Post Conversion/Domestication. After all filings are complete, we will update other corporate documents for our clients such as their operating agreements. There may also be other things that need to take care of, such as updating foreign qualifications and trademark registrations. 

8. Attorney Consultation. After the conversion is completed, we provide our clients with a follow-up checklist for the next steps and instructions on things that need to be completed, such as closing tax accounts and opening new accounts. It is also a good introduction to operating your LLC in the State of Florida. Our attorney will then go over all the documents and discuss any follow-up questions our clients have.

How Long Does It Take To Complete a Domestication or Conversion to the State of Florida?

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It generally takes our firm two to three months to domesticate or convert a company from California to the State of Florida. This is due to the delays in processing times by each state. Our firm has been doing this type of work for many years now, and there is no other way to do it faster.

We always expedite any filings possible, but the processing time by the State of Florida and the State of California takes several weeks after they receive the paperwork. It’s important to get it right the first time, as doing it yourself or working with professionals who are not familiar can take months if you get a rejection.

Can I Dissolve My Entity in the State of California?

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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.

What Are the Tax Implications of Converting My California LLC to a Florida LLC?

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Converting a California LLC to a Florida LLC will have various tax implications depending on the specific circumstances of the LLC. Some potential tax implications to consider when domiciling your California LLC to Florida are as follows:

  • State Income Tax: California has a state income tax, while Florida does not have a state income tax. This means that if the LLC is earning income in Florida, it may be able to save on state income taxes. However, it is important to keep in mind that the LLC will still be subject to federal income tax regardless of whether it is in California or Florida.

  • Sales Taxes: Florida has a state sales tax, while California has a state sales tax and a local sales tax. The LLC will need to register with the Florida Department of Revenue and remit the sales tax if required to collect.

  • 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: Even if your LLC is registered in Florida, it may still be subject to state tax laws if it has a “nexus” with the State of California. Nexus can generally be defined as having a physical presence, employees, or substantial activities in the state. It’s important to consider if the LLC will continue doing business in California even after converting to a Florida LLC. If the LLC continues to do business in California after the conversion, it may still be subject to California state taxes.

  • EIN Number: The LLC’s EIN (employer identification number) issued by the IRS will remain the same. It is not affected by the change in the state of organization of the LLC. However, there are a lot of websites that instruct individuals to dissolve their business in California. If you do that, it could be treated as a liquidation of your business by the IRS which can result in tax liabilities.

Should I Work With a Lawyer to Convert My California LLC to a Florida LLC?

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Yes! We can help you with converting your LLC to the state of Florida. We have helped many businesses including consultants, service businesses, and start-ups to relocate to Florida. Going from one coast to another is a big change. But you don’t have to go it alone.




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 calling (727) 279-5037, or if you are ready to convert, check out our service page.

Image Source: San Francisco California from Pixabay.

About Us

FL Patel Law PLLC is a boutique business law firm dedicated to entrepreneurs and companies.

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