How to Redomesticate when Your State Won’t Permit It
In How Can I Move My Corporation to Another State?, I discussed redomestication, i.e., how to move a legal entity from one state to another. In this post, I explain how to redomesticate an entity when the existing state’s law prohibits redomestication.
California Corporation Cannot Redomesticate
About a year ago, the CEO of a California corporation contacted me. He was relocating to Pennsylvania, so it made sense to move his corporation there, too. Unfortunately, California does not permit its corporations, in contrast to limited liability companies (LLCs), to redomesticate. (Please see the CA Secretary of State’s Conversion Information page.)
Furthermore, the existing corporation had a long history and existing contracts with major corporations. The CEO could not just throw that corporation away and start a new one.
The corporation engaged me and a business lawyer in Pennsylvania. We developed, and carried out together, a multi-step plan. The main tasks included the following (the client promptly provided all required signatures):
- I prepared a Plan of Conversion by which the CA corporation would convert to a CA LLC, and Unanimous Written Consents by which the corporation’s directors and the shareholders approved the Plan.
- I prepared Articles of Organization – Conversion by which the CA corporation became a CA LLC, and I filed the Articles with the CA Secretary of State.
- The PA lawyer prepared a Plan of Conversion by which the CA LLC would convert to a PA corporation.
- I prepared a Unanimous Written Consent by which the CA LLC’s managing members approved the Plan.
- The PA lawyer prepared Articles of Incorporation and a Statement of Conversion by which the CA LLC would become a PA corporation, and he filed them with the PA Secretary of State.
- The PA lawyer arranged for Notice of Conversion to be published in accordance with state requirements.
- I prepared a Certificate of Conversion stating that the CA LLC had been converted to a PA LLC and filed it with the CA Secretary of State.
The entire process took about two months – in contrast to a straightforward redomestication, which might take just a couple of weeks. Nevertheless, the CEO was delighted, because the process had proceeded smoothly and his business objectives had been achieved.
Dana H. Shultz, Attorney at Law +1 510-547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.