How to Convert a Florida LLC to a Corporation (and Vice Versa)
In Florida, there is a fairly simple process by which to convert an LLC into a Corporation, or vice versa. Conversions, however, often come with an array of tax implications. The Division of Corporations specifically suggests consulting an attorney and a tax professional before converting.
Florida Registered Agent LLC does not handle conversions.
How to Convert a Florida LLC into a Florida Corporation
The information below refers to what is known as a Statutory Conversion. There are other forms of conversion, some of which may be a better option for your company.
Prepare a Plan of Conversion
A Plan of Conversion must include, at the very least:
- Your LLC’s Name
- The Name of Your New Corporation
- The Terms and Conditions of Conversion (specifically, how LLC membership percentages will be converted into corporate shares of stock)
Approve Plan of Conversion
According to state law, FL limited liability company members must be notified in advance of any meeting where a Plan of Conversion will be submitted and voted upon. A simple majority of managers who are members must submit approval in writing (if there are no managers, other rules apply).
File a Certificate of Conversion and Articles of Incorporation
Both forms are submitted to the Division of Corporations. Even though you are technically converting your LLC, you must still go through with all the formalities involved in forming a corporation, such as drafting bylaws, electing corporate officers, and issuing stock certificates.
|Florida LLC to Corporation Conversion Facts|
|Forms to File||Certificate of Conversion ($35)Articles of Incorporation ($70)|
|Certified Copy (optional)||$8.75|
|Certificate of Status (optional)||$8.75|
|File With||Division of Corporations, New Filing Section|
|Expedite||Fax (only w/Sunbiz E-File Account)|
Tax Implications for an LLC to Corporation Conversion
The IRS treats a statutory conversion as a transfer of assets and liabilities from the LLC to the corporation in exchange for shares of stock, followed by the liquidation of the LLC. While this is the normal course of events, there may be special consequences for your particular company. You should meet with a tax professional to fully understand the tax liabilities of a conversion.
How to Convert a Florida Corporation into a Florida LLC
The process for converting a corporation to an LLC is the same as above, just with different forms and fees.
Make a Plan for Conversion
Include the current name of your FL corporation, the new name of your LLC, and a specific plan for how shares of stock will be converted into member ownership percentages.
State law requires that all shareholders eligible to vote are notified of the conversion and given the opportunity to vote. A simply majority of votes in each share class are required to approve the conversion, unless alternative voting rules have been approved by the board of directors, in the Articles of Incorporation, or in the corporate bylaws.
File Articles of Conversion and Articles of Organization
Both documents are filed with the Division of Corporations. Your new LLC must undertake all of the normal tasks that go with forming an LLC: writing an operating agreement, appointing members and managers, etc.
There is a $25 fee to file Articles of Conversion, and a $125 fee to file Articles of Organization.
Tax Implications for Corporation to LLC Conversion
Unfortunately, converting from a corporation to an LLC is often costly. The IRS views such a conversion as a liquidation of the corporation. Just as with a normal liquidation, the corporation itself must pay a tax, and the shareholders are also required to pay a tax on the assets gained in the liquidation.
It is possible to lessen this tax burden by electing for the new LLC to continue to be taxed as a corporation. However, this may not be ideal for your business over the long term.
You should consult with a tax professional to determine the best path forward for your business.