9 Considerations for Domesticating or Converting an Illinois LLC to a Florida LLC

Relocating, Domiciling, Transferring, or Converting an Illinois LLC to a Florida LLC

Updated: May 27, 2023
Reading Time: 10 Minutes

Objectives:

• Domicile an Illinois 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 (LLCs)

Table of Contents

• What is a Conversion or Domestication?
• Does Illinois Allow LLCs to Move Out of State?
• Is My Illinois 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 Illinois 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 Illinois 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 Illinois LLC to a Florida LLC?
• What Are the Tax Implications of Converting My Illinois LLC to a Florida LLC?
• Should I Work With Attorney Patel to Convert My Illinois LLC to a Florida LLC?

It’s no secret that businesses from across the country are flocking to Florida like never before. Many do so looking to take advantage of Florida’s lack of a state income tax and many other pro-business policies. Those interested in making a similar move might be able to do so using a type of corporate transaction known as statutory conversion.

Converting an Illinois LLC to a Florida LLC presents many challenges, 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.

This article explains our firm’s process for converting an Illinois LLC to a Florida LLC and what we do to ensure that the relocation is executed flawlessly. We’ll also touch on some of the risks associated with a mishandled conversion and how we can help you avoid those pitfalls and complications.

Your business could even be accidentally liquidated if you make the wrong mistake when converting your Illinois LLC to a Florida LLC. 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 converting a business without an attorney’s assistance.

A statutory conversion is a legal process that lets an Illinois LLC convert into 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 are often used interchangeably.

By using statutory conversion, a business can change its formation state without dissolving and starting over from scratch in a new place. This preserves the business’s continuity, minimizes disruptions, and preserves important relationships, contracts, and licenses.

After domesticating, the LLC will be regulated by the Florida Revised Limited Liability Company Act unless the LLC has a foreign qualification in Illinois, in which case it will still be subject to Illinois laws and regulations. Be sure to discuss this with our corporate attorney.

Converting an Illinois LLC to a Florida LLC is authorized under Section 201 of the Illinois Entity Omnibus Act. A similar process known as domestication can be used to change an Illinois corporation into a Florida corporation.

No, conversion will not dissolve your Illinois unless you make a mistake when filing. Dissolving your Illinois LLC isn’t a part of the conversion process, either, despite what some non-attorney sources incorrectly claim. You should not dissolve your company unless you are ready for it to be closed down permanently.

Whether your LLC can continue using the same EIN will ultimately be decided on a case-by-case basis. However, the IRS’s guidance says that most businesses can keep using the same EIN after undergoing a statutory conversion under certain circumstances. The business’s continuity must be maintained and no changes can be made besides amending the LLC’s formation state if it wants to use the same EIN after converting from an Illinois LLC to a Florida LLC.

What follows is a general overview of how our firm can help convert your Illinois LLC to a Florida LLC and how we make things easier for you over the course of the project. It does not count as guidance or legal advice for your business and its particular circumstances, which can impact the conversion process more than you might expect. Please schedule a consultation with our attorney for your unique situation.

When managing conversion projects for our clients, we begin by reviewing the relocating business to confirm whether statutory conversion is the best option available. It also gives us insight into the company, which we use to craft a plan for converting the Illinois 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 Illinois and Florida state agencies
• Updating the LLC’s operating agreement and other corporate documents to reflect its conversion from an Illinois LLC to a Florida LLC
• A final consultation to address remaining concerns and questions

Because of our dedication to quality and expediency, you can expect your conversion project to be completed within two to three months when working with our firm. This is the fastest timeline possible for converting an Illinois LLC to a Florida LLC. Anyone claiming to have done it sooner is probably mistaken, and most likely simply dissolved their original business and formed a new entity.

Although our process has been fine-tuned across hundreds of conversion and domestication projects, there are still some hard limits that come into play when dealing with state agencies. Because of backlogs, short staffing, and other issues, they usually need several weeks to process our filings.

This turnaround time means that even small mistakes in your documents can cause significant delays. Thankfully, when you hire our firm to manage your LLC conversion, our expertise and attention to detail means that you can worry less about your relocation while we keep your project on track.

Every state has a different filing fee for processing conversion paperwork. The filing fee for Illinois starts at $100.00, while Florida’s is $155.00, coming to a total of $255.00. There will of course be other costs, especially if you want to expedite your filings. Mistakes, too, are going to cost you extra. In some cases, you might even end up paying more to correct your documents than you would have paid for a lawyer who could have executed them the right way the first time.

We provide flat fees for domestication and conversion projects based on the complexity of the relocation. Schedule an initial consultation with our attorney to review your LLC and get a quote for your project. We handle domestication for our clients for both states and know exactly how to relocate your business without disruptions or hassles.

Without the proper skills, knowledge, and legal expertise, converting an Illinois LLC to a Florida LLC can result in disaster. However, hiring our firm to manage your conversion helps ensure that your relocation efforts aren’t wasted over simple mistakes.

Some of the common risks of attempting the conversion process without an attorney’s 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 an Illinois 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.

Keep in mind that, despite its length, this list is not comprehensive. It is only a sample of the problems and threats that can arise when converting or domesticating a business without the proper experience.

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 company is in safe hands when we’re the ones in charge of converting your Illinois LLC to a Florida LLC.

As demonstrated above, attempting to convert an Illinois LLC to a Florida LLC on your own can open you up to a lot of problems ranging from personal liability to the company’s liquidation. Hiring our firm is the best way to make sure that everything goes according to plan when relocating your business to the Sunshine State.

1. If your LLC no longer does business in Illinois, then it likely no longer has a nexus in that state, which means that the company won’t need to file any paperwork with the State of Illinois ever again.

2. After converting from an Illinois LLC to a Florida LLC, our clients can enjoy working with Florida professional accountants, attorneys, and other professionals and service providers that know and live Florida LLC and business law.

3. With our firm managing their conversions, our clients benefit from a seamless transition from Illinois to Florida that doesn’t interrupt the LLC’s ability to keep doing business.

4. We’ll draft Florida Articles of Organization that immediately replace the LLC’s initial formation documents. All LLC powers remain LLC powers, along with rights, benefits, exemptions, privileges, and principles.

5. Every member can keep the same level of membership interest in the 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 will be substituted with the name of the Florida LLC.

6. After converting the Illinois LLC to a Florida LLC, the business’s owners do not need to reside in the state of Florida.

7. Many LLCs will no longer have a taxable connection, also known as a nexus, back in their original state after relocating to Florida. In other words, converting to a Florida entity could save you money on income taxes and other taxes that you were responsible for back in Illinois. Check with your tax professional for guidance on these matters, as they vary from business to business.

8. Because statutory conversion only changes the business’s domicile, converting from an Illinois LLC to a Florida LLC won’t change the company’s EIN, either. It’s the same business as before and will continue reporting taxes as it always did.

9. After domesticating, the LLC will still have access to the same bank accounts, the same taxpayer ID, the same operations, and the same contracts as before.

The tax implications of moving an LLC from one state to another can have major downstream effects on your business. The specific changes will vary from business to business, and while our legal team can help you navigate some of these changes, it’s essential to reviewing this matter with your tax professional if you want to stay compliant with the IRS. Some common issues to consider discussing are:

• State Income Tax: Florida has no state income tax for its residents, which can seem like quite the break when compared to the 4.95% individual income tax and 9.5% corporate income tax imposed by Illinois. While this won’t impact federal taxes, this means that the company may be able to save on state income taxes after converting from an Illinois LLC to a Florida LLC.

• Franchise Tax: Illinois has a franchise tax, unlike Florida. The LLC will need to close its account with the Illinois Department of Revenue and file final returns if required.

• Nexus: A nexus, or taxable connection, is generally established when a company has a physical presence, employees, or substantial activities in a given state. If your LLC still has a nexus in Illinois after converting to a Florida LLC, then you may need to stay compliant with Illinois tax laws even after moving.

Once the company has been converted from an Illinois LLC to a Florida LLC, our clients continue to benefit from Attorney Patel’s valuable guidance and knowledge of both law and business. A post-conversion checklist will also be provided to help introduce them to owning a Florida LLC.

At the end of the project, our corporate attorney will sit down for a consultation to address any remaining questions or concerns. 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 Illinois 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 now.

Ready to make the move from the Windy City to Florida’s tropical paradise? 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, you can schedule a time with us through our online calendar.

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