Form 638 – Certificate of Conversion of a Limited Liability Company Converting to a Real Estate Investment Trust

Jurisdiction: Country: United States | Province or State: Texas

What is a Form 638 – Certificate of Conversion of a Limited Liability Company Converting to a Real Estate Investment Trust?

Form 638 is the Texas Secretary of State filing used to convert a limited liability company into a Texas real estate investment trust (REIT) under the Texas Business Organizations Code. A statutory conversion changes the entity’s form but not its identity, so the legal person that existed as an LLC continues seamlessly as a REIT. Assets, contracts, liabilities, permits, and proceedings remain with the same continuing entity; the filing refreshes the public record and governing framework to reflect REIT status while preserving business continuity.

This form is typically prepared by business owners, in‑house or outside counsel, and paralegals supporting real estate sponsors or platforms. It is used when a Texas REIT form is required by financing or investors, when sponsors want REIT-style governance and capital structure, or as part of a broader reorganization to align multiple property‑owning subsidiaries under an umbrella REIT. Because the conversion must coincide with valid REIT formation, Form 638 is submitted together with the REIT’s formation instrument (the certificate of trust).

Conversions to a REIT are often undertaken to streamline capital raising, facilitate co‑investment, adopt trustee fiduciary oversight, or unify governance across a multi‑asset portfolio. Lenders may prefer a REIT platform for covenant or eligibility reasons; acquirers and institutional investors may favor the familiar disclosures and scalability of a REIT. Converting also positions the enterprise for possible federal REIT tax status once applicable tax tests are satisfied, though the state conversion itself does not determine federal tax classification.

Operationally, the conversion is meant to be low‑friction. Property titles, leases, vendor contracts, and financing agreements remain with the continuing entity unless a contract requires notice or consent due to a change in entity type or name. After filing, the company should update records with banks, insurers, title companies, and government agencies that track entity details. In short, Form 638 records the change from LLC to REIT, confirms proper internal authorization, sets the effective time, and pairs with the certificate of trust so the converted entity is validly organized as a Texas REIT when the conversion takes effect.

When Would You Use a Form 638 – Certificate of Conversion of a Limited Liability Company Converting to a Real Estate Investment Trust?

Use this form when a Texas LLC—or a foreign LLC registered or operating in Texas—will become a Texas REIT via statutory conversion. Common scenarios include:

• Adopting REIT governance, trustee oversight, and beneficial ownership interests.
• Aligning the entity’s state‑law form with an intent to pursue federal REIT tax status.
• Satisfying investor or lender conditions that require a REIT structure.
• Consolidating an LLC portfolio under a REIT platform to streamline capital raises or standardize governance.
• Establishing a REIT parent with LLCs as property‑level subsidiaries for consistent holding practices.

Typical filers include the LLC’s managing member or manager under authority in the operating agreement, counsel drafting the plan of conversion and filings, and paralegals coordinating approvals and submissions. The effective time can be set to match deal milestones (funding, closings, or deliverables) by electing immediate effectiveness, a delayed date/time, or effectiveness upon a specified event.

Do not use this form for a merger, interest exchange, domestication, or a simple name change; those are different transactions with different filings. A conversion filing also does not replace contractual notice or consent obligations; review material agreements for provisions requiring notice or consent upon a change in entity type or name.

Special planning

• The LLC is formed outside Texas and is qualified in multiple states. Plan post‑conversion updates to foreign registrations.
• The operating agreement imposes supermajority or class approval thresholds or investor veto rights. Confirm and document those approvals.
• Properties or programs (e.g., tax abatement, industrial revenue bonds) have REIT‑specific rules or filings. Identify and plan these updates.

In brief, use Form 638 when you are converting an LLC into a Texas REIT through a statutory conversion, and you are ready to submit the REIT’s certificate of trust at the same time.

Legal Characteristics of the Form 638 – Certificate of Conversion of a Limited Liability Company Converting to a Real Estate Investment Trust

When accepted by the Secretary of State, a properly completed Form 638 effects a statutory conversion under Texas law. The filing is binding if it includes the required content, reflects valid internal approvals, and sets an effective time (on filing, at a later date/time, or upon an objectively determinable future event within the allowed period).

Continuity is central to the conversion

• Identity: The REIT is the same legal person that existed as the LLC; there is no dissolution or new entity creation.
• Property: Title to all property remains with the continuing entity by operation of law; re‑deeding or assignments are not required solely due to the conversion, though recording a notice can facilitate title review.
• Obligations: Debts, contracts, and duties continue with the REIT; the obligor does not change.
• Litigation: Existing claims and proceedings continue unabated in the name of the converted entity, subject to administrative updates if a tribunal or counterparty requires them.
• Authorizations: Permits and licenses remain in place, subject to agency rules for updating records to the REIT name and entity type.

While continuity reduces friction, proactive updates minimize confusion. Notify lenders, title companies, vendors, insurers, and regulatory bodies, and deliver required contract notices or obtain consents if a change in entity type or name triggers such obligations.

Before filing, obtain proper internal approvals. Review the LLC operating agreement, side letters, and Texas law to identify the approval threshold (often supermajority or unanimous for fundamental transactions). Prepare a plan of conversion detailing the exchange of interests and effective mechanics, and record approvals through dated consents or minutes. Ensure the plan reflects the exact terms approved.

At the same time, the converted entity must be formed as a Texas REIT by filing the certificate of trust. The certificate sets the REIT’s name, purpose, governance baseline, registered agent/office, and initial trustees. The name must meet Texas naming standards and be distinguishable on state records, and the REIT must maintain a Texas-registered agent and registered office for service of process and official notices.

Tax treatment is separate. Federal REIT status depends on meeting organizational, ownership, income, asset, and distribution tests. A state‑law conversion does not itself confer federal REIT status. Coordinate with tax advisors on federal elections or notifications, EIN treatment, Texas franchise tax classification, and updates to payroll, sales, and use tax accounts. Confirm how the conversion affects financial reporting and compliance calendars.

Other legal considerations

• Governance: Management transitions from an operating agreement to trustee governance under a trust instrument; understand fiduciary duties and authority of trustees and any officers.
• Equity: LLC membership interests convert into REIT beneficial interests pursuant to the plan. Update ownership ledgers and processes for transfers and restrictions.
• Securities: Issuances or exchanges of beneficial interests may implicate securities laws; confirm exemptions or registrations as applicable.
• Foreign qualifications: Amend out‑of‑state registrations to reflect the new name and entity type; some states will require certified copies of the conversion.
• Public records: Consider recording notices or certified copies in county property records to confirm the name change for title examiners.

In essence, this form legally changes the entity’s Texas form without interrupting its existence, provided you meet content, approval, and formation requirements and complete practical updates in public and private records.

How to Fill Out a Form 638 – Certificate of Conversion of a Limited Liability Company Converting to a Real Estate Investment Trust

1) Confirm authority and approvals.

• Review governing documents and law. Examine the operating agreement and any side letters for conversion, appraisal, redemption, class vote, or consent requirements. Note supermajority or unanimous thresholds and any conditions tied to final documents.
• Draft a plan of conversion. Describe conversion steps, the exchange of LLC interests for REIT beneficial interests, treatment of fractional interests or cash components, and any adjustments to capital accounts or reserves.
• Obtain approvals. Secure member or manager consents consistent with the operating agreement and Texas law. If approvals are conditioned on the trust instrument or other definitive terms, attach those exhibits to the consents.
• Document the record. Keep dated written consents or minutes showing the approving parties, vote tallies, and the adoption date.

2) Confirm the converted entity details.

• Entity form. Confirm the converted entity will be a Texas REIT (not a corporation or LP).
• Name. Clear and reserve (if needed) a compliant, distinguishable REIT name and ensure consistent usage across all documents.
• Registered agent and office. Obtain agent consent and confirm a Texas street address for service. Use the agent’s official legal name.
• Trustees and governance. Identify initial trustees, confirm willingness to serve, and align trustee powers and any officer appointments with the trust instrument.

3) Prepare the REIT formation document.

• Complete the certificate of trust. Include the exact REIT name, purpose (often broad lawful purposes), and any authorized classes of beneficial interests at formation.
• Registered agent and office. Match the conversion form details exactly.
• Initial trustees and organizer. Provide the required names and details, and ensure signature authority for the organizer or allowed signatory.
• Execute the document. Follow signature format requirements; prepare counterparts if multiple signers; confirm acceptability for electronic submission.

4) Converting LLC information.

• Exact legal name. Use the name as shown on state records (including punctuation and spacing).
• Texas file number. Include the number for a Texas LLC or the foreign registration file number for a foreign LLC qualified in Texas.
• Jurisdiction and entity type. State the LLC’s home jurisdiction and that the converting entity is an LLC.

5) Converted REIT information.

• REIT name. Match the certificate of trust exactly.
• Entity type and jurisdiction. Indicate real estate investment trust and Texas.

6) State approval and plan of conversion.

• Approval statement. Affirm that the conversion was approved as required by the Texas code and the LLC’s governing documents.
• Plan reference. Maintain the plan of conversion in the entity records. It should specify exchange mechanics, consideration, and effective provisions.
• Attachments. Attaching the plan is optional; many filers keep it private to preserve flexibility and confidentiality.

7) Choose the effectiveness of filing.

• Immediate effectiveness. Effective upon filing by the Secretary of State.
• Delayed date/time. Select a permissible future date and time to coordinate with closings or fundings.
• Event‑based effectiveness. Condition effectiveness on an objectively determinable event or fact within the allowed period (e.g., receipt of specified funds into a designated account, full execution of a named credit agreement). Avoid vague triggers; keep evidence of occurrence. If the event does not occur in time, refile or select another effectiveness option.

8) Sign the certificate.

• Authorized signer. An authorized person of the LLC must sign and confirm authority in resolutions or consents.
• Signature block. Include the LLC’s full name, signer’s name, title, and date. Confirm electronic signature format if filing online.
• Logistics. If multiple signatures are desired under internal policy, consolidate on one instrument where feasible. Ensure the certificate of trust is also properly executed.

9) Attach required documents.

• Certificate of trust. Include the signed REIT formation instrument so both filings are processed together.
• Name reservation and third‑party consents. Attach only if the filing office requests them; otherwise, retain in records.
• Optional schedules. If helpful to expedite review, include a summary of conversion terms, understanding that attachments become part of the public record.

10) Calculate fees and file.

• Fees. Prepare payment for both the conversion and REIT formation filings; confirm acceptable payment methods for your filing channel.
• Submission. File the conversion certificate and the certificate of trust together by mail, courier, in person, or electronically if available. Ensure consistent, legible information.
• Confirmation. Request file‑stamped copies or certificates of filing; consider expedited processing when timing is critical.

11) After filing, complete follow‑ups.

• Records. Retain stamped and certified copies and store them with the plan, consents, and resolutions.
• Notifications. Inform banks, lenders, title companies, insurers, landlords, tenants, auditors, and key vendors. Provide copies upon request.
• Property and contracts. Record notices or certified copies in county property records where customary. Update vendor and customer contracts as required by notice or consent clauses.
• Governmental accounts. Update licenses, permits, and tax accounts (payroll, sales and use, franchise). Align EIN and tax classification with advisor guidance.
• Internal governance and accounting. Adopt initial REIT resolutions, update signature authority and banking, implement REIT‑appropriate policies, and adjust accounting and reporting frameworks.

Practical tips

• Clear the REIT name early and confirm availability.
• Confirm the LLC’s good standing in its home jurisdiction and in Texas (if foreign).
• Keep a master data sheet to ensure consistency across all documents.
• Obtain and document registered agent consent and verify the registered office address.
• Maintain a complete transaction binder (plan, consents, trust instrument, filings).
• If tied to a financing or closing, align the effective time with objective triggers and circulate a closing checklist.
• Prepare pre‑ and post‑conversion cap tables and ownership ledgers.
• Anticipate requests for certified copies or good standings from lenders and title companies.

Legal Terms You Might Encounter

• Plan of conversion: The written document describing how the LLC converts to a REIT, including approvals, effective mechanics, exchange ratios, treatment of fractional interests and cash components, and any conditions precedent or deliverables.
• Certificate of trust: The REIT’s formation instrument filed with the conversion. It sets the REIT’s name, purpose, initial trustees, and registered agent/office. Without it, the conversion cannot yield a valid Texas REIT at effectiveness.
• Governing instrument: The trust instrument or declaration of trust that governs the REIT’s operations post‑conversion, including trustee powers, actions by consent, issuance of beneficial interests, and transfer restrictions.
• Beneficial owners: The REIT’s equity holders whose beneficial interests replace LLC membership interests under the plan of conversion, potentially in classes or series with distinct rights.
• Trustees: Fiduciaries managing the REIT, similar to corporate directors, who may appoint officers. Their duties and authority derive from law and the governing instrument.
• Registered agent and registered office: The Texas service of process recipient and associated street address, which must be consistent across all filings.
• Effective date or effective time: When the conversion legally takes effect—immediate, delayed, or event‑based—used to coordinate closings and compliance updates.
• Statement of approval: The filing attests that the conversion was properly approved under the governing documents and applicable law.
• Consideration or exchange terms: How LLC interests convert into REIT beneficial interests, including ratios, cash in lieu of fractions, and any special rights; typically detailed in the plan of conversion.
• Continuity of entity: The principle that the REIT is the same legal person as the LLC, so assets, liabilities, and contracts remain with the continuing entity by operation of law.

FAQs

Do you need a formal plan of conversion before filing?

Yes. A written, adopted plan confirms the approvals, exchange mechanics, and effective provisions and supports the approval statement on the form. Keep the executed plan in the records and align stakeholders (lenders, investors, title companies) around its terms.

Do you have to dissolve the LLC to become a REIT?

No. The conversion changes form, not identity. Contracts, licenses, assets, and obligations remain with the continuing entity, subject to any required notices or consents.

Do you file any other document with this form?

Yes. File the REIT’s certificate of trust with the conversion so the entity is validly organized as a Texas REIT upon effectiveness.

Can you pick a future effective date or make effectiveness conditional?

Yes. You can elect immediate effectiveness, a delayed date/time, or effectiveness upon a clearly described, objectively determinable event or fact within the permitted period. Keep evidence of the event. If it does not occur on time, the conversion will not take effect.

Do contracts, permits, and titles transfer automatically?

They remain with the continuing entity by operation of law. Nonetheless, review agreements for notice or consent requirements and update agency registrations and county records as customary.

Do you need a new tax identification number?

Often no, because the entity continues. Confirm EIN treatment and post‑conversion tax classification with advisors and update payroll, sales and use, and franchise tax accounts accordingly.

Do you need new foreign qualifications outside your home state?

Update out‑of‑state registrations to reflect the REIT name and entity type. Some jurisdictions allow amendments; others require new qualifications and may ask for certified copies of the conversion.

Do existing members automatically become REIT owners?

Typically, yes, as provided in the plan of conversion. Update ownership ledgers, communicate new rights and restrictions, and issue book‑entry records or certificates if used.

Checklist: Before, During, and After the Certificate of Conversion of a Limited Liability Company Converting to a Real Estate Investment Trust

Before signing

• Executed the plan of conversion with exchange terms and effective mechanics.
• Consents or minutes meeting required approval thresholds, including any class votes.
• REIT name cleared (and reserved if needed) and compliant with naming rules.
• Draft certificate of trust aligned with approved governance; trustees confirmed.
• Registered agent consent and an accurate Texas registered office address.
• Exact LLC legal name, home jurisdiction, and state file number reconciled to records.
• Signatory authority established by resolutions or consents.

During signing

• Verify LLC name, jurisdiction, and entity type on the conversion form.
• Confirm REIT name, entity type, and jurisdiction match the certificate of trust.
• Ensure the approval statement matches your plan and consents.
• Select immediate, delayed, or event‑based effectiveness; describe any event clearly.
• Confirm attachments (certificate of trust, name reservation if applicable) are complete.
• Sign and date; include printed name and title; validate e‑signature requirements.

After signing

• File the conversion and certificate of trust together with fees; monitor processing.
• Obtain file‑stamped and certified copies and store them with the plan and consents.
• Notify banks, lenders, title companies, insurers, landlords, tenants, and key vendors.
• Update licenses, permits, tax accounts, payroll systems, and foreign qualifications.
• Update internal records (ownership ledger, governance policies, accounting systems).

Common Mistakes to Avoid –  Certificate of Conversion of a Limited Liability Company Converting to a Real Estate Investment Trust

• Omitting the certificate of trust. Remedy: submit a complete package with both instruments; if missed, contact the filing office immediately to supplement.
• Choosing a noncompliant or unavailable REIT name. Remedy: clear the name early, prepare a backup, and use it consistently everywhere.
• Using a vague effective event. Remedy: draft objective, verifiable triggers, and keep documentation; otherwise, pick immediate or delayed effectiveness.
• Mismatching data across documents. Remedy: Use a master data sheet to align names, file numbers, addresses, and agent details.
• Skipping internal approvals. Remedy: follow the operating agreement, obtain all required votes or consents, and preserve a clear record.
• Overlooking contract notice/consent requirements. Remedy: review material agreements and deliver notices or obtain consents in a timely manner.
• Ignoring foreign qualification updates. Remedy: inventory jurisdictions and update registrations promptly post‑conversion.
• Failing to update tax and payroll accounts. Remedy: coordinate with tax advisors and providers to reflect the REIT form and name.

What to Do After Filling Out the Certificate of Conversion of a Limited Liability Company Converting to a Real Estate Investment Trust

1. Assemble and submit the filing package. Include the signed conversion form, signed certificate of trust, any name reservation details, and payment. Use a trackable submission method and request expedited handling if needed.
2. Distribute evidence of filing. Obtain file‑stamped and, if needed, certified copies or certificates of filing. Provide them to trustees, officers (if any), lenders, title and insurance contacts, auditors, and other stakeholders.
3. Update internal governance. Adopt initial REIT resolutions, ratify the conversion, appoint officers if applicable, approve banking and treasury authorities, and implement policies appropriate to REIT oversight. Replace the LLC operating agreement in the minute book with the REIT governing instrument.
4. Implement ownership changes. Update cap tables and ownership ledgers to reflect beneficial owners and exchange ratios. Issue communications detailing book‑entry records or certificates, transfer restrictions, and contact points for investor relations or trustee matters.
5. Bring external records current. Amend foreign qualifications to reflect the REIT name and entity type. Update business licenses and permits at the state and local levels. Confirm payroll, sales, use, and franchise tax accounts reflect the REIT.
6. Review property and contract records. Provide certified copies or notices in county records where customary to document name continuity for title. Notify landlords, tenants, franchise counterparties, and major vendors, and refresh vendor master files. Update insurance certificates if the named insured changes to the REIT.
7. Align accounting and reporting. Update financial presentation as needed, retitle bank accounts, refresh signature cards, and adjust audit engagement letters and management representation templates to reflect REIT form.
8. Calendar ongoing compliance. Track annual reports, franchise tax filings, trustee meetings, and owner communications. If pursuing federal REIT status, build a calendar for distribution requirements and asset/income tests.
9. Correct errors promptly. If you discover a typo, misstatement, or inconsistency, file an amendment or corrective instrument and notify stakeholders with updated records.