A: Yes. Under a recently enacted law, Florida business entities (corporations, limited liability companies (LLCs), partnerships and limited partnerships) can directly convert into other Florida business entities. For example, a Florida corporation can convert into a Florida LLC, partnership, or limited partnership. Conversely, a Florida LLC, general partnership, or limited partnership may be converted into a Florida corporation.

A plan of conversion must be prepared to include the terms and conditions of the conversion, including the manner and basis of converting ownership interests (i.e., stock in the case of a Florida corporation, limited liability company membership interests in the case of an LLC, or partnership interests in the case of a partnership) into ownership interests of the converted entity. A conversion becomes effective upon the filing of a certificate of conversion with the Secretary of State of the State of Florida.

Conversions do not affect any obligations or liabilities of the business entity incurred prior to the conversion. All rights of creditors are preserved following conversion and all debts and liabilities of the converting entity become debts, liabilities and duties of the converted entity. A conversion does not constitute a dissolution of the converting entity; rather, the conversion results in the continuation of the existence of the converting entity in different form.

Prior to undertaking any conversion, careful consideration of the potential legal and tax implications should be examined. For example, notwithstanding the liberalization of the conversion rules, the conversion of a corporation into an LLC may be deemed, for tax purposes, to be a liquidation of the corporation, followed by the contribution of the assets and liabilities of the corporation by its shareholders to the LLC. Please consult with your tax and legal advisors before making undertaking any conversion.

In accordance with Internal Revenue Circular 230, we advise you that unless otherwise expressly stated, any discussion of a federal tax issue in this communication or in any attachment is not intended to be used, and it cannot be used, for the purpose of avoiding federal tax penalties.

Arnold M. Zipper received his juris doctorate, magna cum laude, from Georgetown University and concentrates his practice in corporate, securities, and contract law, advising public and privately held corporations in the areas of corporate governance and formation, private placements, initial public offerings, mergers and acquisitions, technology licensing, corporate finance, and Sarbanes-Oxley Act compliance. The above article is for informational purposes only and should not be considered legal advice as to any specific matter.