What is Florida Entity Conversion?

Understanding the Florida Entity Conversion

In Florida, you can convert your business entity from one structure into another through a fairly straightforward and simple process. You must submit the proper conversion document, along with a new formation filing and pay the allotted fees to the Division of Corporations.

Below, we’ll cover the most important you’ll need to know to complete your Florida entity conversion.

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Plan of Conversion

The first step in a Florida entity conversion is writing a detailed Plan of Conversion. The plan needs to cover specifically how ownership will be allocated from one entity to the other.

For example, if you are converting a Florida LLC into a Florida corporation, you must address how the LLC members’ ownership percentages will become shares of corporate stock. This is called the Terms and Conditions of Conversion.

The Plan of Conversion must also list the current name of your Florida business and the proposed name of your new Florida entity (your name will have to change, at the very least, the business identifier at the end of its name).

A Plan of Conversion must be approved by the members or shareholders of your company. You must notify members/shareholders in advance of the meeting at which the plan will be submitted and approved. The meeting must be held, and a simple majority of members/shareholders/managers, submitted in writing, must be forthcoming.

Submitting the Conversion

There are two documents you must submit to the Florida Division of Corporations: a conversion application and the formation document of your new company.

LLCs Converting to Corporations Submit:

  • Certificate of Conversion ($35)
  • Articles of Incorporation ($70)

Corporations Converting to LLCs Submit:

  • Articles of Conversion ($25)
  • Articles of Organization ($125)

The filing is made with the Florida Division of Corporations. You cannot file a conversion online.

If your business information is not changing (your principal business address, your Florida registered agent), then you can simply enter this same information on your new formation documents.

Mailing Address:

Department of State
Division of Corporations
PO Box 6327
Tallahassee, FL 32314

Formal Considerations

It is important to keep in mind that although you are converting one Florida entity into another, you are also in essence creating an entirely new company. This means that you must go through the proper formalities for that entity.

Whether you are converting to a Florida LLC or FL corporation, you will need to write a new governing document (operating agreement or bylaws), which must be agreed upon and ratified. Formal accounts, such as banking accounts and lines of credit, must be updated.

In the case of an LLC converting to a corporation, you are required to appoint a new Board of Directors and new corporate officers. As well, stock certificates would need to be authorized and issued.

Tax Implications

Before making an entity conversion in Florida, you should consult a tax professional. There are definite tax implications for businesses pursuing a conversion.

The IRS looks upon an LLC converting to a corporation as an assets transfer from the LLC in exchange for shares of stock in the new corporation. This may or may not come with significant costs.

A corporation converting into an LLC is more costly. The IRS treats this conversion as a corporate liquidation, complete with the taxes usually associated with such a liquidation. Shareholders are required to pay taxes on the assets gained in the liquidation.

A tax accountant will be able to better help you understand all the implications of a Florida entity conversion.