Businesses can change in various ways. Sometimes your company will take on new leadership, shift its customer base, or even downsize. Other times your business will expand as you attract new investors or your profits grow. While forming a limited liability company (LLC) probably made sense for you in the beginning, circumstances have likely changed, and you might've decided that converting to a corporation is the way forward.
The details of how to convert your Florida LLC to a Florida corporation will vary depending on your specific situation. However, here's some general guidance on the process. (For more general information, read our overview on converting an LLC to a corporation or S corporation.)
In Florida, you can convert your LLC to a corporation in two different ways:
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 corporation) that can acquire the assets and liabilities of your old entity (your LLC).
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, separate business entity.
To convert your Florida LLC to a Florida corporation by statutory conversion, you need to:
Key elements of the conversion procedure are laid out in the following sections of the Florida Revised Limited Liability Company Act: Fla. Stat. § 605.1041-1046.
Apart from Florida law, your LLC operating agreement might set out rules and procedures for converting your LLC to another entity. For example, your operating agreement might require all members to approve the conversion in writing. Additionally, your agreement could provide a procedure to convert the owners' membership shares into corporate shares.
Your operating agreement should comply with Florida law. If it does, you're safe to follow its conversion protocols. But where your operating agreement is silent on conversion procedures, Florida's default rules for converting your LLC will apply.
To convert your LLC, you'll need to create a plan of conversion. Your plan must include the following information:
(Fla. Stat. § 605.1042 (2023).)
Your plan can include additional rules and procedures for the conversion. For example, you can include a deadline for the LLC members to vote on the plan. But you're not required to include these extra details in your plan.
The LLC members will need to vote to approve the conversion and the plan of conversion. First, you'll need to notify LLC members in writing about the meeting to approve the conversion—unless the member has waived this notification requirement. You're only required to notify members who are entitled to vote on the conversion, which could be all members or only members who are managers. You'll need to notify the members between 10 and 60 days before the meeting.
The notice must include:
By default, the law requires approval in writing by a simple majority of LLC voting members. However, your operating agreement might require more than a simple majority of the voting members.
(Fla. Stat. § 605.1043 (2023).)
Generally, the plan of conversion can be amended or abandoned prior to filing the conversion paperwork with the Department of State. You can modify or abandon the plan either in the same way the plan was approved or in a way that's 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. § 605.1044 (2023).)
Once your conversion has been approved, you'll need to file articles of conversion and articles of incorporation with the Department of State. Florida provides a single document containing a cover letter, articles of conversion, and articles of incorporation that you can complete and mail to the Florida Division of Corporations.
As of 2023, the total filing fee is $105. This fee includes the $35 articles of conversion fee and the $70 articles of incorporation fee.
The articles of conversion provide basic information about your LLC and proposed new corporation, such as:
(Fla. Stat. § 605.1045 (2023).)
The articles of conversion will need to be signed by either a member of the LLC or an authorized representative. You'll also need to include your LLC's articles of organization as an attachment.
State law requires that you include your articles of incorporation along with the articles of conversion. The articles of incorporation can be relatively simple. At a minimum, they should include:
(Fla. Stat. § 607.0202 (2023).)
The articles of incorporation will need to be signed by an incorporator.
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 Department of State recommends that you seek the assistance of an attorney.
When you convert your LLC to a corporation, generally everything associated with your LLC will transfer to the new corporation as if the conversion didn't occur.
Specifically, the following that once existed under the LLC will now continue under the corporation:
(Fla. Stat. § 605.1046 (2023).)
For example, if a creditor has a claim against your LLC, that same creditor will have the same claim against your new corporation. Or, if your LLC owns a piece of land, your new corporation will now own that property.
Apart from the above steps, you'll also need to take care of all the tasks normally associated with creating and maintaining a new corporation, such as:
It's important that you follow all of these required formalities in order to ensure that your business continues to have limited liability and can take advantage of various tax benefits.
One other key step in the conversion process is to make sure that no business contracts—such as loan agreements, commercial lease agreements, and licenses and permits—will be affected by your business's entity change.
If you don't want to convert your LLC to a corporation but simply want your business to be taxed as a corporation—instead of as a partnership—you only need to file IRS Form 8832. There's no need to convert your LLC to a corporation at the state level.
If you'd like to convert your LLC to an S corporation instead of a regular C corporation, then you must elect S corporation tax status. To convert to an S corporation, you'll need to convert your LLC to a corporation at the state level and then file an IRS Form 2553 at the federal level.
The specific tax consequences for LLC-to-corporation conversions vary from one case to the next. Because the tax consequences can sometimes be significant, you should consult with a tax adviser before undertaking any conversion.
For more information, read how corporations are taxed.
Before converting your LLC to a corporation, 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.
Moreover, Florida has additional and distinct legal requirements for corporations that you'll need to follow. If you need legal assistance with converting your LLC or complying with the Florida Business Corporation Act, you should talk to a business attorney.
For a more complete discussion of the steps involved in forming a corporation, consult Incorporate Your Business: A Step-by-Step Guide to Forming a Corporation in Any State, by Anthony Mancuso (Nolo).