What is the Difference Between LLC Conversion and LLC Domestication?
Need to find out whether domestication or conversion is an option?
Our LLC Domestication Analyzer analyzes the law of both states. It can help you:
- Find out whether the LLC qualifies to move to a new state
- Get a detailed step-by-step breakdown of the domestication/conversion process based on the laws of both states
- Get a free, no-obligation estimate of the costs involved
Most U.S. states have a statutory procedure that allows a business to “move” the LLC to another state by changing the law that applies to the LLC. This procedure may be called either conversion or domestication, depending on the terminology used in the state statutes.
For example, an LLC formed in Texas may change its jurisdiction to Florida. After the domestication procedure, the LLC is treated as though it had been organized in Florida and will no longer be treated as a Texas LLC.
By definition, the procedure for moving an LLC always involves two states: the state that the LLC is moving from and the state that the LLC is moving to. Both states must permit the move.
Because each state is free to use the terminology it chooses, state laws tend to vary in the language used to describe the domestication process and the documents involved in the process. Many terms are synonymous with similar terms used in other states. This article explains common differences in terminology.
Domestication vs. Conversion
The term domestication deals specifically with moving an entity from one state to another without changing the form of the entity. An LLC that domesticates from Texas to Nevada is still an LLC. The only change is the law that applies to the LLC.
The term conversion has historically applied to changes in the form of entity. A Texas LLC that changes to a Nevada corporation is no longer an LLC. It has converted from one entity type (LLC) to another (corporation). That is true regardless of whether the business moves to a different state. A Texas LLC could also convert to a Texas corporation under the Texas conversion procedure, even though Texas law applies to both the old LLC and the new corporation.
Strictly speaking, the term domestication refers to a change in governing law; the term conversion refers to a change in the form of entity. But many state LLC acts have blurred this distinction by using the same procedure for both types of changes. In these states, the term conversion could mean either:
- A change in the form of an entity from an in-state (domestic) entity to an out-of-state (foreign) entity; or
- A change in the form of an entity from one entity type to another entity type.
In states with LLC acts that use conversion as a catch-all term, the term domestication does not appear in the statute. But this does not mean that domestication is not allowed, only that the statute uses different terminology.
Twenty-three U.S. states use the term domestication to refer to the process of moving an LLC from one state to another. Those states include Alaska, Arizona, Connecticut, District of Columbia, Idaho, Illinois, Indiana, Iowa, Kansas, Massachusetts, Minnesota, Mississippi, Nebraska, New Hampshire, New Jersey, North Dakota, Pennsylvania, South Dakota, Utah, Vermont, Virginia, Wisconsin, and Wyoming.
Fourteen U.S. states—California, Colorado, Delaware, Florida, Georgia, Louisiana, Maine, Michigan, Nevada, North Carolina, Ohio, Oregon, Texas, and Washington—use the term conversion to refer to the same legal proceeding.
Plan of Domestication vs. Plan of Conversion
Domestication statutes require each LLC to adopt a document to begin the domestication process. This document must meet specific legal requirements and be adopted by the LLC before any paperwork can be filed with the state.
The following twenty-two states use plan of domestication to refer to the document that must be adopted by the LLC owners: Alaska, Arizona, Connecticut, District of Columbia, Idaho, Illinois, Indiana, Iowa, Massachusetts, Minnesota, Mississippi, Nebraska, New Hampshire, New Jersey, North Dakota, Pennsylvania, South Dakota, Utah, Vermont, Virginia, Wisconsin, and Wyoming.
The following thirteen states use plan of conversion to refer to the document that must be adopted by the LLC owners: California, Colorado, Delaware, Florida, Georgia, Louisiana, Maine, Michigan, Nevada, North Carolina, Oregon, Texas, and Washington.
Kansas uses the term agreement of domestication and Ohio uses the term declaration of conversion to refer to the same document.
Regardless of terminology, the plan must be prepared to include the requirements of both the state that the LLC is moving from and the state that the LLC is moving to. The preparation of a plan that satisfies the law of both states is a key part of the LLC domestication process. Our LLC domestication service includes an attorney-designed plan that meets the requirements of both states.
Articles of Domestication, Statement of Domestication, Articles of Conversion, Certificate of Conversion
Fourteen states use the term articles of domestication to refer to the document that must be filed with the state to approve the domestication: Iowa, Massachusetts, Minnesota, Nebraska, New Hampshire, New Jersey, North Dakota, South Dakota, Utah, Vermont, Virginia, Wisconsin, Wyoming, and Indiana.
This corresponding document may be called a statement of domestication (Alaska, Arizona, Connecticut, Idaho, Illinois, Mississippi, and Pennsylvania); articles of conversion (Florida, Nevada, North Carolina, Oregon, and Washington) or certificate of conversion (California, Delaware, Georgia, Michigan, Ohio, and Texas). It may also be called a statement of conversion (Colorado, Maine), certificate of domestication (Kansas), request for conversion (Louisiana), or statement/plan of domestication (District of Columbia).