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Florida - New entity OR Convert LLC?

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FL819

Member
Florida
Is converting a licensed limited liability company to a not for profit entity with a name change a good idea?


Question Explained

I established a licensed business in a regulated industry one year ago as a single member limited liability company. The business has applicable insurance, checking accounts, and a minimal web presence. The business has no liabilities/debts, has never been marketed, and has never engaged in commerce.

A change in our future objectives suggests that a not for profit designation is needed. The business would qualify for 501(C3) based published guidelines. The annual report requirement and insurance renewal for the entity are arriving soon but no bind has yet occurred.

Before we commit to those expenses, I wanted to get an opinion on which path is more appropriate. I would think establishing a new entity is the best choice but both decisions come with consequences.

It's probably important to mention that both entities share the first two words in their name and only the third word changes. This matters because it allows us to use the identity branding we secured for both names on the web and elsewhere.

Option 1: Convert, Change Name

1. File an articles of amendment with the Florida Department of State
2. Request a name change with the licensing agency for reissue
3. Request a name change and tax designation change with the Internal Revenue Service
4. Request a name change with the municipality to receive an updated business tax receipt
5. Consult with my insurance agent so the new policy is drafted correctly before bind
6. Close all previous business accounts and open new business accounts under the newly assigned name and ein if applicable

Option 1: Convert, File D/B/A

If permitted in Florida, we may be able to change the designation of the current llc to nonprofit, report the changes to all recording agencies, and then file a d/b/a to make use of the new identity which the licensing agency does allow. The steps above would mostly apply less any name change events.

Option 1: Argued

Benefits: Much faster name conversion time compared to new licensing issuance
Benefits: Eliminate redundant costs including having two insurance policies which are significant expenses
Problem: This process will probably create a mess of public record
Problem: The general public and watchdog organizations may criticize an entity conversion as being indecisive and questionable

Option 2: New Entity

1. File not for profit articles of incorporation with the Florida Department of State
2. Request a not for profit tax identification number from the IRS
3. Apply for a new business license with the regulating state agency
4. Apply for new a business tax receipt with the governing municipality
5. Establish new financial accounts

Option 2: Argued

Benefits: Start clean with a brand new entity that has no history and is established correctly
Problem: If we do not dissolve the current llc then we potentially triple expenses between both entities including double insurance policies
Problem: If we dissolve the current llc then we are unable to perform services for up to three months while we complete these steps and await licensing
 
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