Previously, we published a blog detailing the 2011 Florida legislation which established that a charging order is the sole remedy available to a creditor who holds a judgment against a member of a multiple member LLC. Following this development, the use of a Florida multiple member LLC to obtain asset protection now appears to be a well-established facet of Florida law. Conversely, stock ownership in a Florida corporation is freely attachable by an individual’s creditors. These asset protection benefits, along with the flexibility of the Florida LLC statutes and the lower general cost to operate a Florida LLC when compared with a Florida corporation, make the LLC the entity of choice when establishing a new Florida businesses.
But what if you already have an established corporation? Thankfully, the Florida Statutes allow for a relatively painless conversion. Florida Statute 608.439(2) states that “any other business entity may convert to a domestic limited liability company if the conversion is permitted by the laws of the jurisdiction that enacted the statute or other applicable law governing the other business entity and the other business entity complies with such laws and the requirements of this section in effecting the conversion.” For the purposes of the statute, the term “other business entity” includes, a corporation; a common law or business trust or association; a real estate investment trust; a general partnership, including a limited liability partnership; a limited partnership, including a limited liability limited partnership; or any other domestic or foreign entity that is organized under a governing law or other applicable law. Thus, the majority of business entities currently in use today can be converted into an LLC.
Business owners looking to convert their Florida corporation into an LLC should discuss the benefits of conversion with a knowledgeable business and tax law attorney. This is because many small business corporations initially elect to be federally taxed as S-corporations and the LLC that results from the conversion will usually want to retain this tax status. S-corporations are subject to strict regulation under the Internal Revenue Code, and a failure to properly structure the new LLC in accordance with these regulations can jeopardize this status and cause some real tax problems. A business attorney with experience in tax matters will be able to avoid any issues.
With proper assistance, converting a Florida corporation into a Florida LLC is not nearly as difficult as it may initially appear. If you are interested in discussing how this process could benefit your small business, contact an Attorney in Jacksonville who can help you today.