How to Move an LLC to California

There are many reasons why a business owner may want to move an LLC to California. This article discusses the use of conversion, known in some states as LLC domestication, to transfer an LLC to California.

What is California LLC Conversion?

California conversion is a legal process that allows an out-of-state LLC to become a California LLC.¹ Conversion to California does not necessarily involve a physical relocation, though that can be part of the process. Conversion changes the LLC’s legal state of organization—also called state of formation or charter state. This means the laws of the LLC’s original state no longer govern the LLC. After the conversion, California law governs the LLC.

Many states use the name domestication for the process of changing an LLC’s state of organization. In those states, conversion is a separate legal procedure that changes a business’s entity type—from a corporation to an LLC, for example. California law uses the same process and the same name (conversion) for both transactions. California even lets a business change both its entity type and state in the same conversion. So, an out-of-state corporation or partnership could convert to a California LLC (or vice versa) if the other state’s law also allows the transaction.²

Why Transfer an LLC to California?

California LLC conversion is particularly useful when owners move to California from another state. Business owners may want to transfer an LLC from its original state of formation to California for several reasons:

• Move the business with the owners. Business owners who move to California often want to establish a solid business connection with their new home state. For example, an owner of a web-based business who moves to California might find it more convenient to run the business under California law.
• Simplify compliance. An LLC governed by the law of the state where the owner lives often has fewer filing requirements than an LLC governed by the laws of a different state. For example, a Delaware-chartered LLC that does business mainly in California needs to meet two sets of reporting requirements: those of Delaware (where it was formed) and those of California (where it operates). Converting the Delaware LLC to a California LLC could reduce its annual filing fee and reporting requirements.
• Save taxes. Each state has its own tax laws. The taxes an LLC pays often depend on whether the LLC has a connection—or nexus—with a state. If an LLC’s owners move, the LLC’s charter could be the only factor creating a taxable nexus with the state of formation. Converting the LLC to California can break the nexus with the original state—exempting the LLC from tax obligations in the original state of formation.
• Improve choice of law. California Revised Limited Liability Company Act rules may be a better fit for the LLC’s business goals than the laws of its current state. If so, converting to a California LLC can have legal benefits.
• Promote better professional relationships. California professionals are more likely to be familiar with California law. If the owners live in California, converting the LLC to a California LLC makes it easier to find lawyers, accountants, and other local professionals who know California requirements and norms.

While these are the most common reasons, there may be others, depending on how California law compares to the law of the state where the LLC was formed.

What are the Benefits of California LLC Conversion?

Although there are other methods, statutory conversion is usually the best way to transfer an LLC to California. Compared to the other options, California LLC conversion is more streamlined and less disruptive. Advantages of statutory conversion include:

• Avoiding business disruption. California LLC conversion is a legal process that happens behind the scenes. There is no need to fire and re-hire employees, transfer assets, or take other actions that could disrupt the LLC’s normal operations.
• Keeping the same entity identity. A business that completes a California conversion is the same entity before and after the conversion. The LLC keeps the same Employer Identification Number (EIN) and continues to file taxes as always. Other forms of business transfer require a business to change its EIN—which often causes tax and administrative problems.
• Keeping the same bank accounts. An LLC that completes a California conversion has no need to close and re-open bank accounts. The California LLC after conversion is a continuation of the same company, so it can keep the same accounts with no interruption.
• Keeping existing business relationships. California LLC conversion does not change the LLC’s rights and obligations. All of the LLC’s business contracts and relationships continue in the California LLC as before.
• Avoiding dissolution. LLC conversion does not end the LLC. It remains the same LLC, but it is now governed by California law and not the law of the prior state. The LLC still exists, so there is no need for the expense and hassle of dissolving it in the old state.
• Not requiring foreign registration. An LLC that becomes a California LLC through a conversion has no need to register as an out-of-state (foreign) LLC in California. The LLC must register as a foreign LLC in the old state only if it plans to continue doing business there.

These benefits make LLC conversion a useful tool to move the LLC to California efficiently—with much less trouble and cost than the other options.

What LLCs can Convert to California LLCs?

California LLC conversion is not possible for all LLCs. California will not accept an LLC conversion if the other state has no statutory process for LLCs to change states.³ In other words, an out-of-state LLC cannot convert to California if the LLC is currently organized in a state that does not authorize the procedure California calls conversion and some other states call domestication.

Conversion options may also be limited by the LLC’s type of business. California law bars most business entities that perform professional services from being organized as LLCs.⁴ There is an exception if a California licensing law specifically allows LLCs to hold the license, certificate, or registration needed to perform the professional services.⁵

Because LLCs cannot perform most professional services in California, an out-of-state LLC that performs professional services cannot convert to a California LLC in most cases. The business can instead organize as a California professional corporation or another business form that can perform those services.⁶

How Much Does California LLC Conversion Cost?

The overall cost of a California LLC conversion includes labor costs, filing fees, and (if necessary) registered agent fees. For more details, read How Much Does It Cost to Move an LLC to Another State? Here is a brief overview of these costs:

• Labor costs. Service providers who manage LLC conversions charge labor costs for their time and effort. The work includes gathering information; preparing and circulating documents for signatures (including e-signatures); communicating with LLC owners and state agencies; and filing documents with the Secretary of State’s office. The total labor costs an LLC incurs depends on what the provider charges.
• Filing fees. An LLC pays filing fees for a California conversion to both the California Secretary of State and the current state’s equivalent governmental agency. California charges a $70.00 filing fee for conversion of an out-of-state LLC to California.⁷ The LLC must also submit a Statement of Information—which requires a $20.00 filing fee—within 90 days of conversion. The fee amount the LLC must pay to the other state depends on the state.
• Registered agent fees. An LLC’s registered agent is a person or entity authorized to accept services of process for the LLC. The agent’s name and address are provided to the California Secretary of State and listed in the public records. The fee to hire a corporate registered agent in California is usually around $125.00 per year. An LLC owner or manager who lives in California can serve as registered agent if he or she does not mind having his or her address made publicly available. The privacy and stability a corporate registered agent provides is worth the cost in most cases.

How Long Does California LLC Conversion Take?

The length of a statutory conversion procedure depends on the turnaround time for all parties involved. Factors that affect the total time needed include:

• How long it takes the document preparer to prepare and file documents;
• How long it takes the LLC members and managers to review and sign documents; and
• How long it takes the state agency to process the filing.

What Laws Govern California LLC Conversion?

The California LLC domestication (conversion) process must follow two states’ laws: California and the LLC’s current state. Conversion documents must comply with both states’ conversion (or domestication) laws, so the final documents depend on the state from which the LLC is moving.

The law of the LLC’s current state controls the following aspects of an out-of-state LLC’s conversion to California:

• Power to convert. The LLC’s current state must allow conversion (or domestication in some states) of an LLC to another state. If the current state does not provide a conversion method, conversion to California is not possible.⁸
• Plan of conversion. The current state’s laws decide the exact requirements for an LLC’s plan of conversion.⁹
• Conversion approval. The LLC’s managers, members, or both must approve the plan of conversion. The current state’s laws decide how many votes are necessary to approve the plan.¹⁰
• Effective date. The current state’s laws decide the date when the conversion to California is official.¹¹
• Additional exit requirements. The current state may add other requirements that an LLC leaving the state must meet during the conversion process.

What is the California LLC Conversion Process?

The California LLC conversion process consists of two components: document preparation and administrative tasks.

Document Preparation

Document preparation is a critical part of the conversion process. The documents set forth how the conversion will be carried out and bind the LLC and its’ members when the conversion is completed. All conversion documents must be carefully prepared to follow both states’ laws and to ensure the conversion is implemented smoothly.

• Plan of Conversion. A Plan of Conversion that is designed to comply with the requirements of both California law and the law of the state that the LLC is moving from.
• California Limited Liability Company Articles of Organization – Conversion. The California Limited Liability Company Articles of Organization – Conversion with all information and any related documents needed for filing with the Business Entities Office of the Secretary of State.
• Conversion Document for Filing in Prior State. Depending on state law, this document may be called articles of domestication, statement of domestication, articles of conversion, certificate of conversion, statement of conversion, certificate of conversion, or a similar term.¹²
• California Operating Agreement. A state-specific Operating Agreement to properly structure the LLC as a California LLC, provide rules for profit distributions and decision-making, clarify the federal income tax classification, and help provide maximum liability protection.
• Resolution Authorizing Conversion. A resolution approving the transaction and adopting the California organizational documents as the LLC’s governing documents.

Administrative Tasks

After the necessary documents are in written form, the LLC must complete several administrative steps to implement the conversion and make it effective.

• Conduct preliminary name search. Check the official records of Business Entities of the Secretary of State to determine whether the LLC’s name is available in California. (If the name is unavailable, a slight name change may be required to complete the conversion.)
• Obtain signatures on the Limited Liability Company Articles of Organization – Conversion. The Limited Liability Company Articles of Organization – Conversion must be signed by the required parties. The Business Entities of the Secretary of State allows the Limited Liability Company Articles of Organization – Conversion to be e-signed.
• File the Limited Liability Company Articles of Organization – Conversion. File the Limited Liability Company Articles of Organization – Conversion with the Business Entities of the Secretary of State. The Business Entities of the Secretary of State allows the Articles of Organization to be e-filed.
• File conversion documents with prior state. File the conversion documents with the Secretary of State or equivalent agency for the state that the LLC is moving from.

What is the Legal Effect of California LLC Conversion?

California LLC conversion is designed to allow for a smooth transition. The process lets the LLC continue existing and operating without interruption. After conversion, the LLC is a California llc governed by California law, but it is otherwise mostly unchanged.

Conversion of an out-of-state LLC to California has the following legal effects:

• No change in company identity. An LLC that converts to or from a California LLC remains the same LLC.¹³ Because it is the same entity, it keeps its same EIN and otherwise continues its same tax identity for reporting purposes.
• No change in property rights. After conversion, an LLC has the same property rights as before conversion.¹⁴ It owns the same assets and can keep its same bank accounts.
• No change in assets or liabilities. Existing contracts remain intact and are not affected by the conversion. The LLC keeps any right to receive payment for goods and services. It still owes the same debts to the same creditors—with any liens surviving the conversion.¹⁵
• No need for new deed or asset assignments. A converted LLC does not need to record a new deed if it owns California real estate. The company may wish to record with the county recorder a certified copy of its certificate of conversion to provide written notice that the converted LLC owns the property.¹⁶ Documents assigning other assets are also unnecessary.
• No effect on legal actions. Ongoing lawsuits or court processes involving the LLC continue uninterrupted during and after conversion.¹⁷ If the LLC’s legal name changes during the conversion, the new name simply replaces the former name. For example, the name may need to change due to different naming rules between state LLC laws.
• No change to LLC ownership interests. Ownership interests in the LLC are consistent before and after conversion.¹⁸ Members keep the same membership percentages, and their rights and duties in relation to one another and to the company stay the same. Members who wish to make changes to the company’s ownership can do so in the LLC’s new governing documents.

1. Cal. Corp. Code § 17710.08.
2. Cal. Corp. Code §§ 17710.02; 17710.08(a).
3. Cal. Corp. Code § 17710.08(a); Cal. Corp. Code § 17710.02(b).
4. Cal. Corp. Code § 17701.04(b). California defines professional services as services that “may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act [or the Yacht and Shipbrokers Act].” Cal. Corp. Code § 13401.
5. Cal. Corp. Code § 17701.04(b).
6. See, e.g., Moscone-Knox Professional Corporations Act, Cal. Corp. Code §§ 13400, et seq.
7. The filing fee for converting a California LLC to another state is $30.00.
8. Cal. Corp. Code § 17710.08(a); Cal. Corp. Code § 17710.02(b).
9. Cal. Corp. Code § 17710.08(b).
10. Cal. Corp. Code § 17710.08(c).
11. Cal. Corp. Code § 17710.08(d).
12. 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. The 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).
13. Cal. Corp. Code § 17710.09(a).
14. Cal. Corp. Code §§ 17710.09(b)(1)-(b)(4).
15. Cal. Corp. Code §§ 17710.09(b)(2)-(b)(3).
16. Cal. Corp. Code § 17710.07(a)(2).
17. Cal. Corp. Code § 17710.09(b)(4).
18. Cal. Corp. Code § 17710.02(a)(1).