It may seem that once you have selected and established your Florida corporation, the matter would be closed. However, circumstances can arise when a Florida business owner needs to change from a corporate structure to a limited liability company (LLC). The good news is that this option is available under Florida law. Here is more on converting a corporation into an LLC in Florida.
Florida Corporations
In Florida, business owners can elect to form various entities. One of these business structures is a corporation. A corporation is considered a separate legal entity that exists apart from those who own and manage it on a day-to-day basis. Corporate entities can enter into contracts, pay taxes, and engage in business transactions. The owners (shareholders) have limited liability for the corporation.
In Florida, a business owner may form a professional corporation (professional service corporations) based on their occupational status (e.g., dentist, lawyer, medical practice) or an S or C Corporation based on specific tax considerations. In addition, non-profit or 501(c)(3) corporations can also be established. However, for purposes of this discussion, the focus will be on for-profit enterprises.
Why Choose an LLC?
At one time, it was thought that C and S corporations offered the best benefits for business owners seeking to limit their tax and personal liabilities. However, today many entrepreneurs have chosen to structure their business as a limited liability company (LLC) instead.
LLCs offer business owners two main benefits: 1) limited liability and 2) partnership-like functionality. LLCs are also less restricted in terms of how many owners they can have or how they are owned.
Converting from a Corporation to an LLC
Florida law provides for converting a domestic corporation into a different business entity, including a limited liability company.
Under the state’s Business Corporations Act, a converting corporation must create a plan on conversion that includes:
- The name of the domestic corporation,
- The name and jurisdiction of organization of the other business entity to which the domestic corporation is to be converted,
- The conversion terms and conditions, including how shares will be converted into LLC interests,
- Certain required statements,
- The articles, certificate, registration, or other organizational document by which the other business entity has been or will be organized under its governing laws,
- Any other provisions relating to the conversion.
Florida law also requires that the conversion plan be adopted and approved by the board of directors and shareholders of a domestic corporation in the same manner as a merger of a domestic corporation. This will involve the shareholders voting at a meeting or using a written resolution to approve the conversion and adopt the proposed plan and articles, certificate, registration, or another organizational document.
Once these steps have been taken, the designated corporate representative must deliver the certificate of conversion to the Florida Department of State for filing. The certificate must include:
- A statement that the corporation has been converted into an LLC and that the conversion complies with the applicable laws governing LLCs,
- A statement that the plan of conversion was approved by the converting domestic corporation per the applicable laws,
- The effective date of the conversion,
- The LLC’s principal office address, and
- A statement that the other business entity has agreed to pay any shareholders having appraisal rights the amount to which they are entitled under the law.
The Florida Secretary of State will review the filed conversion documents and, if everything appears correct, the conversion will be approved. After the Certificate of Conversion is approved, the LLC will exist in place of the former corporation.
Converting a Florida corporation to an LLC can be a complicated process, and you want to be sure that your documents are prepared and filed correctly. If you plan on converting your Florida corporation into an LLC, it would be best for you to work with an experienced Florida business attorney.
Contact a Florida Business Attorney Today
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent small business clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.