Texas LLC Plan of Conversion

Jeramie Fortenberry, J.D., LL.M.

Jeramie Fortenberry, J.D., LL.M.

Attorney

Published Jun 26, 2023 Last updated Jul 10, 2023

Texas law authorizes a procedure called LLC conversion that allows an LLC to change its legal home state (its state of formation or domicile) to a new state without dissolving the company.1 A conversion changes the law that governs the company. An out-of-state LLC that completes a conversion to Texas becomes a Texas LLC governed by Texas law.

The Texas LLC conversion process requires multiple steps. The creation of a plan of conversion is a key early step in the process.

What is a Texas LLC Plan of Conversion?

A Texas plan of conversion is a written document authorizing a Texas LLC to take the steps necessary to move the LLC to a new state. An LLC’s Texas plan of conversion specifies how an LLC conversion will be carried out and how it will affect the company and authorizes the procedure on behalf of the company.2 The plan of conversion is the initial document an out-of-state LLC creates when converting into a Texas LLC.3 The plan must satisfy the requirements of Texas law and the law of the LLC’s current state.

Some states use the name LLC domestication for the legal procedure that transfers an LLC to a new state.4 In those states, the written plan for changing states is called a plan of domestication. The term plan of domestication is not a formal legal term under Texas law. When used informally in Texas, plan of domestication means a plan of conversion.

The legal requirements for a plan of domestication or a plan of conversion vary between states. A converting LLC needs to make sure its plan meets both states’ requirements.

What Information Must a Texas LLC Plan of Conversion Include?

Texas law requires an LLC plan of conversion to be in writing and to contain certain information listed in the statute. An out-of-state LLC’s plan of conversion when moving to Texas must include:

  • The LLC’s current name (the name in the original state immediately before the conversion);
  • The name the company will use as a Texas LLC;
  • A statement that the original LLC will continue its existence as the new LLC;
  • A statement that after the conversion the company will be a Texas LLC;
  • A description of the manner and basis (including use of a formula) of converting the members’ interests in the original LLC into ownership interests in the Texas LLC after the conversion; and
  • The LLC’s new Texas certificate of formation that will bind the company after the conversion.5

An LLC can include within its plan of conversion any other provisions that are related to the domestication and not prohibited by Texas law.6 This lets an LLC add into its Texas plan of conversion any provisions that the other state requires, so the company can prepare a single plan of conversion that complies with both states’ laws.

How Does an LLC Approve a Texas Plan of Conversion?

Once the members settle on a plan of conversion, the LLC must adopt the plan as an official act of the company. The plan can be adopted through a resolution or within the minutes of a meeting of members or managers. If the LLC is converting into Texas from another state, the current state’s law and the company’s governing documents determine the standard needed for approval of the plan of conversion.7

Does an LLC that Transfers to Texas File its Plan of Conversion?

A Texas plan of conversion is an internal document of the company that memorializes the members’ or managers’ approval of the conversion and the terms under which it will be carried out. An LLC need not file its plan of conversion with the Texas Secretary of State. Converting companies often elect to attach the plan to the document filed during in Texas the conversion (called the certificate of conversion). An LLC that chooses not to file the plan of conversion must provide additional information in the certificate of conversion.8

What Other Steps are Needed to Move an Out-of-State LLC to Texas?

Adopting a plan of conversion is an essential element of the LLC conversion process. But simply adopting a plan is not enough to move a company to a new state. An out-of-state company moving to Texas must complete every step of the Texas LLC conversion process—which includes:

  • Preparing and adopting the plan of conversion;
  • Preparing the Texas certificate of conversion;
  • Preparing the Texas certificate of formation;
  • Preparing the current state’s equivalent of the certificate of conversion (often called articles of domestication, statement of domestication, or articles of conversion);
  • Preparing the LLC’s new Texas operating agreement (called a company agreement under Texas law);
  • Filing the Texas certificate of conversion and certificate of formation with the Texas Secretary of State and paying the $300.00 filing fee required for each; and
  • Filing the original state’s conversion document with that state’s business filing office (usually the Secretary of State).

When the conversion is effective, the LLC continues its existence as the same company but is now a Texas LLC governed by Texas law.9 The Texas LLC still has all the same assets, liabilities, contractual rights, and obligations that the out-of-state LLC had before the conversion.

  1. Tex. Bus. Orgs. Code Ann. § 10.101.
  2. Tex. Bus. Orgs. Code Ann. § 10.102(a).
  3. Tex. Bus. Orgs. Code Ann. § 10.102(a).
  4. See Tex. Bus. Orgs. Code Ann. § 1.002(10).
  5. Tex. Bus. Orgs. Code Ann. § 10.103(a).
  6. Tex. Bus. Orgs. Code Ann. § 10.104.
  7. Tex. Bus. Orgs. Code Ann. § 10.154(b)(2).
  8. Tex. Bus. Orgs. Code Ann. § 10.154.
  9. Tex. Bus. Orgs. Code Ann. § 10.106.