For Spanish companies eyeing the U.S. market, specifically Florida, there are several routes of entry. One lesser-known option is the Domestication Process. Foreign Entity Domestication offers a strategic and efficient route to business relocation without the complications of traditional dissolution and reformation, and with significant tax advantages. This process allows Spanish companies (SL, SRL, and SA) to seamlessly transition into Florida LLCs or C-Corps, preserving their operational continuity and mitigating the fiscal challenges typically associated with international business relocations.

Understanding Domestication

Domestication, in this context, refers to the legal process by which a company organized in one jurisdiction (Spain) converts into a company organized in another jurisdiction (Florida) while maintaining its legal identity and continuity. This is distinct from dissolution and reformation and from opening branches.

Advantages of Domestication

1. Full Relocation: Unlike opening branches or new companies, domestication allows Spanish companies to move their headquarters to Florida along with all their capital and assets. The domesticated entity and its capital and assets will be governed by Florida regulations rather than Spanish ones, including taxation.

2. Continuity of Business Operations: Domestication allows the preservation of operational continuity without dissolution and reformation. This means that all existing contracts, relationships, capital, assets, and rights are preserved, avoiding the need to renegotiate agreements or re-establish business connections from scratch.

3. Fiscal Efficiency: Due to the continuity of business operations, domestication circumvents capital and asset taxation associated with liquidation and dissolution or international transmission, while ensuring a factual transfer of capital and assets to the U.S. jurisdiction.

4. Streamlined Transition: Although it involves more paperwork and regulatory hurdles than opening a branch or a new company, domestication represents a more efficient pathway to bring large capital amounts and consolidated assets to the U.S.

The Domestication Process

The process of domestication involves several key steps in both Spain and Florida. Here’s a detailed look at how it works:

1. Initial Steps in Spain:

1. 1. Relocation Documents: The company’s board of directors or sole director must prepare a comprehensive Relocation Report that justifies the move, provides legal grounds, and details the economic and legal implications, along with a Relocation Project that outlines the operation, the legal form in the destination (if changed), destination bylaws, deadlines, etc. These documents must be made available to all shareholders and creditors and published in the Spanish Commercial Register. 

1. 2. Approval of Relocation: Once the relocation documents are published, a General Meeting of the company must be called at least two months in advance. The General Meeting must approve the relocation documents.

1. 3. Relocation Certificate: Once approved, the relocation agreements must be registered with the Spanish Commercial Register, which will then issue a Relocation Certificate indicating that the Spanish company is now in the process of being relocated and is provisionally suspended.

2. Domestication in Florida:

1. 1. Articles of Domestication: The Spanish company will file a domestication request with the Florida Department of State, Division of Corporations, providing the Spanish Relocation Certificate, Articles of Domestication, and Articles of Organization.

1. 2. Certificate of Domestication: Upon review, the Florida Department of State will approve the domestication and issue a Certificate of Domestication confirming that the Spanish company has officially become a Florida entity.

3. Final Steps in Spain:

1. 1. Final Closing: To finalize the relocation and close the Spanish company definitively at the Spanish Commercial Register, the Spanish company must provide the Certificate of Domestication.

1. 2. Updating Records: Although this is not part of the legal process, the now Florida entity will need to update its information, including bank accounts, legal documents, and tax authorities.

4. Operating in Florida:

1. 1. The Florida entity will need to comply with ordinary Florida and U.S. regulations, obtain an EIN, licenses if required, open local bank accounts, and file taxes as any other domestic entity.

Fiscal Implications and Benefits

One of the most compelling reasons for Spanish entrepreneurs to consider Florida is, alongside the market size and value, the U.S. fiscal advantage. However, operating through new companies tends to separate capital and assets to avoid higher or even double taxation. This separation leads to operational complications that are solved through complicated international corporate structures that entail legal and tax risks. Domestication addresses all these complexities by maintaining the company’s existing legal and financial framework.

∙ Avoidance of Double Taxation: Domestication helps avoid double taxation issues that may arise from liquidating a Spanish company and forming a new entity in the U.S. This can result in significant tax savings.

∙ Preservation of Assets: The process allows for the preservation of existing assets and financial positions, eliminating the need for asset transfers and related tax implications.

∙ Operational Efficiency: By maintaining its legal identity, the domesticated company can continue operations without the need to reestablish its business relationships and contracts, resulting in cost savings and operational efficiency.

For Spanish companies aiming to relocate to Florida while leveraging Florida’s tax regulations, the Domestication Process is highly recommended. Unlike the conventional approach of forming a new company, domestication allows businesses to maintain their operational continuity and legal identity, while transitioning their capital and assets under Florida’s favorable tax framework. This method provides a strategic advantage by avoiding the complexities and tax implications of dissolution and reformation. For a seamless integration into the U.S. market and optimal tax benefits, domestication offers a more efficient and beneficial alternative.