Converting a Corporation or S Corporation to an LLC in Florida

The way you operate your business now might not be how you envisioned when you first incorporated it. Perhaps in the beginning, you wanted the rigidity of corporate structure and an accountable chain of command. But as you started building your company, the advantages of a limited liability company (LLC) for your particular business became apparent. After some consideration, you've determined that converting to an LLC will be in your company's best interest.

The details of how to convert your Florida corporation to a Florida LLC will vary some depending on your specific situation. However, you can generally follow these steps to convert your business.

For more information on the legal and tax implications of conversion, read our overview on converting a corporation to an LLC.

Florida Business Corporation Act

In Florida, you can convert your corporation to an LLC in two different ways:

• Statutory conversion: Your corporation's assets and liabilities will be automatically transferred to the new LLC without the need to create a new, separate entity.
• Statutory merger: You must file to create a new LLC before your corporation's assets and liabilities can be transferred over.

A statutory merger can be viewed as a work-around and usually doesn't make sense in states that allow for entity conversions. Effectively, with a merger, you're simply creating a new entity (your LLC) that can acquire the assets and liabilities of your old entity (your corporation).

Because both methods are available to you under Florida law, you should probably choose the statutory conversion method. The result is the same for both methods, but a statutory conversion creates a cleaner, simpler transfer that doesn't require you to create a new business entity.

To convert your Florida corporation to a Florida LLC by statutory conversion, you need to:

• prepare a plan of conversion that includes, or has attached to it, articles of organization for the new LLC
• have the board of directors adopt the plan of conversion
• get the corporation's shareholders to approve the plan of conversion, and
• file articles of conversion and articles of organization with the Florida Department of State (DOS).

Key elements of the conversion procedure are laid out in the following sections of Florida law: Fla. Stat. § 607.11930-11935.

Reviewing Your Corporate Bylaws

Apart from Florida law, your corporation's bylaws might set out rules and procedures for converting your corporation to another entity. For example, your bylaws might require all shareholders to approve the conversion. Additionally, your bylaws could provide a procedure to convert the shareholder's stock into LLC membership interests.

Your corporation's bylaws should comply with Florida law. If your bylaws do, you're safe to follow the included conversion protocols. But where your bylaws are silent on conversion procedures, Florida's default rules for converting your corporation will apply.

Preparing a Plan of Conversion to Turn Your LLC Into a Florida Corporation

To convert your corporation, you'll need to create a plan of conversion. Your plan must include the following information:

• the name of your corporation
• the name of the new business, where it'll be formed (in Florida), and what type of entity it is (an LLC)
• how the corporate stock will be converted to LLC membership interests
• the other terms and conditions of the conversion, and
• the proposed articles of organization for the new LLC.

(Fla. Stat. § 607.11931 (2023).)

The DOS has sample articles of organization available for download along with instructions for filling out the form. Be aware that the sample isn't designed specifically for use in a corporation-to-LLC conversion. More generally, keep in mind that, depending on your level of expertise, it might be advisable to seek the assistance of an attorney in preparing your plan of conversion and articles of organization.

Board of Directors Adopt the Plan of Conversion and Present the Plan to the Shareholders

First, the board of directors will need to adopt the plan of conversion. Your articles of incorporation or bylaws might have specific requirements for how corporate actions and decisions are approved. For example, your bylaws might say that corporate decisions must be approved by two-thirds of the directors.

If there are no specific requirements, then Florida's default rules will apply. Under Florida law, a majority of the directors present can approve a board action. (Fla. Stat. § 607.0824 (2023).)

Second, once the directors have adopted the plan, they must present the plan to the shareholders for a vote. The directors should recommend that the shareholders approve the plan as long as there are no conflicts of interest. The board can also set conditions for approval of the plan. (Fla. Stat. § 607.11932 (2023).)

Shareholders Vote to Approve the Plan of Conversion

The shareholders will need to vote on the plan of conversion. Your corporation's articles or bylaws might have specific rules or guidance on how shareholders will be entitled to vote. For example, your bylaws could require that all votes be in person.

If the vote will happen at a meeting, the directors need to notify each shareholder—regardless of whether they're entitled to vote—of the meeting. The notice must be between 10 and 60 days before the date of the meeting and must include the following information:

• the date, time, and place of the meeting
• the purpose of the meeting (approving the plan of conversion)
• a copy of the plan of conversion, and
• a copy of the articles of organization (and operating agreement if this organizational document will be in effect immediately after the conversion).

(Fla. Stat. § 607.11932 (2023).) .

By default, the law requires approval by a simple majority of the shareholders present as long as a quorum exists. However, your articles of incorporation or bylaws might require more than a simple majority of the voting members.

In addition to a majority vote by the shareholders present, all shareholders who'll become LLC members in the newly created LLC will need to give their written consent of the conversion.

(Fla. Stat. § 605.1043 (2023).)

Generally, the plan of conversion can be amended or abandoned prior to filing the conversion paperwork with the DOS. You can modify or abandon the plan either in the same way the plan was approved or in a way set out in the conversion plan. If you decide to abandon the plan of conversion after you've already filed the conversion paperwork with the Department, you'll need to file a statement of abandonment with the state. (Fla. Stat. § 607.11934 (2023).)

File Conversion Paperwork with the Department of State

Once your conversion has been approved, you'll need to file articles of conversion and articles of organization with the DOS. Florida provides a single document containing a cover letter, articles of conversion, and articles of organization that you can complete and mail to the Florida DOS Division of Corporations.

As of 2023, the total filing fee is $150. This fee includes the $25 articles of conversion fee and the $125 articles of organization fee.

Florida Articles of Conversion

The articles of conversion provide basic information about your corporation and proposed new LLC, such as:

• the name of your corporation, where it was formed (in Florida), and what type of entity it is (a corporation)
• the name of the new business, where it'll be formed (in Florida), and what type of entity it is (an LLC)
• a statement that the plan of conversion has been approved, and
• a copy of the articles of organization of the new LLC

(Fla. Stat. § 607.11933 (2023).)

Florida Articles of Organization

State law requires that you include your articles of organization along with the articles of conversion. The articles of organization can be relatively simple. At a minimum, they should include:

• the name of the LLC
• the mailing address of the company's principal place of business, and
• the name, Florida street address, and signature of the LLC's registered agent.

(Fla. Stat. § 605.0201 (2023).)

While the articles of conversion, which is part of the document package mentioned above, might appear straightforward, converting your particular business could involve unexpected complications. In its instructions for completing the articles, the Florida DOS recommends that you seek the assistance of an attorney.

How Assets and Liabilities Are Transferred After Conversion

When you convert your corporation to an LLC, generally everything associated with your corporation will transfer to the new LLC as if the conversion didn't occur.

Specifically, the following that once existed under the corporation will now continue under the LLC:

• all of the property belonging to the corporation
• all debts, obligations, and other liabilities of the corporation, and
• all rights, privileges, immunities, powers, and purposes of the corporation.

(Fla. Stat. § 607.11935 (2023).)

For example, if a creditor has a claim against your corporation, that same creditor will have the same claim against your new LLC. Or, if your corporation owns a piece of land, your new LLC will now own that property.

Getting Help Converting Your Florida Corporation

Before converting your corporation to an LLC, make sure you understand the differences between the business structures and the effects of such a conversion. While Florida's conversion process is relatively simple compared to other states, it's important that the conversion process is done correctly. If you have legal questions, consider talking with a business attorney.

Additionally, the tax consequences associated with converting from a corporation to an LLC will be complicated. You should talk with an experienced tax adviser before you start the official conversion process.

For a more complete discussion of the steps involved in forming an LLC, consult Form Your Own Limited Liability Company: Create an LLC in Any State, by Anthony Mancuso (Nolo). This book has guidance on choosing a management structure for your LLC and writing your articles of organization and operating agreement.