How do I Change From a Sub Chapter S Corp to an LLC in Florida?
At one time, being a corporation or a Sub-S corporation was the norm for small businesses. However, many corporations today are opting to a convert to a Limited Liability Company--better known as an LLC--because an LLC offers better protection of assets. According to David K. Staub, an attorney and founder of LimitedLiabilityCompanyCenter.com, with an LLC, creditors are limited to a lien on distributions, and they cannot force a LLC from doing business. Unlike many other states, Florida has a process that allows a business to convert an S corporation into an LLC without having to file for dissolution of the corporation. Daniel Lane, a Florida CPA, offers these conversion steps.
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Instructions
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File a Certificate of Conversion and Articles of Organization with the Florida Department of State. This can be done online.
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Create a new operating agreement for your business to avoid confusion about finances and management.
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Create an Agreement To Convert for your company. Some samples are available online.
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Execute board resolutions and shareholder consents, if applicable. It needs to be on record that boards of directors and shareholders had the opportunity to vote on the change.
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Convert the S Corporation to an LLC in a tax-free manner. This requires the LLC to elect to be treated as an S Corporation by filing IRS Form 8832. Most conversions are set up so the LLC is taxed as an S Corporation for tax reasons.
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Tips & Warnings
A Florida limited liability company is formed by filing articles of organization with the Florida Department of State and paying a filing fee of $125. This is comprised of $100 for the articles of organization plus $25 for the designation of a registered agent.
According to Daniel Lane, attorney and CPA in Port Charlotte, Florida, the conversion of an S Corporation to an LLC should only be undertaken after consulting with tax and legal professionals. While many useful legal and tax benefits can be obtained from the conversion, great care must be taken in analyzing the tax and legal issues involved in the conversion of the existing S Corporation.
References
- Photo Credit business colleagues preparing for business meeting image by Vladimir Melnik from Fotolia.com
