When consumer demand and your business plan align, things can take off—suddenly your sole proprietorship or LLC is in growth mode. To take advantage of this transformation, converting to a corporation may be your route to greater success. Fortunately, making the switch is not only possible, but the State of Florida makes the process straightforward and well defined.
An experienced business attorney can be a strategic partner in the process of converting to a corporation. They are familiar with the pitfalls that other companies have encountered and know exactly what paperwork is necessary. Engaging legal counsel to oversee the conversion process and the contracts involved allows you to focus on the next steps.
What’s Involved in Converting to a Corporation
Growth is the primary reason that companies convert to corporations. Becoming a corporation allows a company to:
- Be more attractive to investors
- Protect officers’ personal assets from liability
- Take your company public and sell stock
- Offer employees stock incentives
- Reinvest profits rather than distributing them.
The benefits of becoming a corporation are multiple, including the creation of a more complex structure that supports greater growth. When boards, bylaws, and shareholders are added to your corporation it creates a standardized structure that is recognized by industries and investors, which can enhance investor and industry confidence in signing a contract with you or making an investment in your stock. The corporate structure provides a clearer succession planning and an easier path to transferring ownership as well.
Florida offers a simplified conversion from LLC to corporation that does not require dissolving the company and starting over. After consulting with a business advisor who can evaluate the tax and structural implications of a C-corporation over an S-corporation, the process typically begins with a plan of conversion and then file articles of incorporation with the Florida Division of Corporations.
Plan of Conversion: this document must detail how the ownership shares of your LLC will become stock shares in the new corporation. The name of your company must change, at least slightly, to differentiate the LLC from the corporation. Members in your LLC must formally approve the conversion.
Articles of Incorporation: these documents, filed with Florida’s Division of Corporations, must include the following:
- An effective date if it is different from the date that your articles are filed with the state.
- The number of stock shares the corporation is authorized to issue.
- The incorporator’s signature as well as contact information (email) for a correspondent.
- An annual report must be filed every year to stay current.
- Optional information: a statement of corporate purpose and names and addresses of officers or directors.
In addition to getting an employer tax identification number (EIN) or federal tax identification number, any company that pays wages must register with the Florida Department of Revenue and comply with payroll tax requirements. C-corporations are also subject to a 5.5% state corporate income tax. Additional business licenses or permits may be required depending on the industry.
To complete the transformation, your new company must adopt bylaws, a set of foundational rules for the way the company will be operated. Bylaws include:
- Defining the roles of officers and directors,
- Outline how meetings are held, how directors are elected, and how votes are cast and counted,
- How the notice of meetings is given (required in Florida),
- How disputes are resolved,
- How contracts are negotiated,
- Fiduciary duties to the corporation.
Taking Your First Step to Incorporating
Florida has simplified the transformation from an LLC to a corporation but there are many aspects of the process to consider, so having a qualified business attorney from WKFK Law on your team can be a valuable asset. Legal counsel can help streamline the transition, ensure compliance with state requirements, and reduce the administrative burden on your business. This strategic partnership can position your company for sustained growth as a corporation.
