California LLC Plan of Conversion
A California LLC conversion allows an out-of-state LLC to change its legal home state to California, or a current California LLC can transfer to another state. An LLC’s first step in the California LLC conversion process is to create a plan of conversion—a legally required document that outlines how the conversion is to be conducted.
What is a California LLC Conversion or Domestication?
California law authorizes a legal procedure—called a California LLC conversion—that changes a company’s legal home state (its domicile or state of formation), changes its entity type, or changes both.1 The California LLC conversion process can change an out-of-state LLC’s domicile state to California or change a California LLC’s domicile to another state. An out-of-state LLC that completes a California conversion becomes a California LLC, but the company is otherwise the same entity—with the same assets, liabilities, rights, and obligations—before and after the conversion.2
A conversion that turns an out-of-state LLC into a California LLC (or vice versa) is the California equivalent of what many states call an LLC domestication. California law does not use the name LLC domestication, but the term California LLC domestication is sometimes used informally to refer to a conversion that changes an LLC’s state of formation to or from California.
What is a California LLC Plan of Conversion?
A California LLC plan of conversion is the first of several documents an LLC creates when completing a California conversion.3 The plan of conversion establishes a written roadmap for how the conversion will proceed and how it will affect the company. For most LLC conversions, the plan of conversion is the most detailed and customized document involved in the transaction.
The document that California law calls a plan of conversion is called a plan of domestication in many states. Depending on the states involved, both titles may apply to the same document. If an LLC converts from Kansas into California (for example), its plan is a plan of conversion under California law and a plan of domestication under Kansas law.
What Information Must a California LLC Plan of Conversion Include?
A converting LLC’s plan of conversion must contain all information required by either state’s laws. For example, a Nevada LLC converting to a California LLC needs a plan of conversion that satisfies both Nevada law and California law.
California’s LLC conversion law provides a list of information that a California LLC’s plan of conversion must include:4
- The terms and conditions of the conversion;
- The state where the LLC is currently organized and the state where it will be organized after the conversion;
- The official name of the LLC after the conversion;
- The manner of converting the members’ ownership interests in the company into interests in the LLC after the conversion;
- The provisions of the LLC’s articles of organization and operating agreement that will bind the members after the conversion; and
- And other details or provisions that the other state requires or that the members wish to include.
This list applies specifically to a California LLC converting to another state. An out-of-state LLC’s plan of conversion for a transfer to California must include all information required by the laws of the LLC’s current state.5
How Does an LLC Approve a California Plan of Conversion?
Once an LLC prepares its plan of conversion, the company must formally approve the plan under the current state’s approval standard:
- Plan of conversion to California. A plan of conversion created by an out-of-state LLC converting to California must be approved by the number or percentage of members or managers specified in the current state’s law or in the company’s operating agreement.6
- Plan of conversion from California. A plan of conversion created by a California LLC converting to another state must be approved by all managers (if applicable) and by a majority of each class of members—unless the operating agreement requires more than a majority of members for approval.7
Does an LLC that Transfers to California File its Plan of Conversion?
An LLC’s plan of conversion is an internal company document that need not be filed with the California Secretary of State. The plan of conversion typically incorporates other documents that are filed later in the conversion process.8 A converting LLC ordinarily attaches unsigned copies of the to-be-filed documents to the plan of conversion. The members’ approval of the plan then serves as approval of the form and content of the documents that will be filed later.
What Other Steps are Needed to Move an Out-of-State LLC to California?
A plan of conversion is an essential part of a California LLC conversion but does not by itself transfer an LLC to a new state. Instead, the plan of conversion is the first step of a multi-step process for changing an LLC’s state of formation. The entire conversion process for converting an out-of-state LLC to California involves:
- Creating and approving the plan of conversion in compliance with both states’ law;
- Preparing the California statement of conversion and California articles of organization; (California combines the two forms into a single document called Articles of Organization – Conversion);
- Preparing the statement of conversion for filing in the current state (the document may be called articles of domestication, statement of domestication, or articles of conversion);
- Preparing the LLC’s new California operating agreement and any company resolution needed to approve the transaction;
- Filing the California conversion documents with the California Secretary of State and paying the $70.00 filing fee; and
- Filing the original state’s conversion document with the state’s business filing office (usually the secretary of state) and paying the state’s filing fee.