You have an LLC but would like to have a C Corporation instead. You are not alone. Having a corporation makes it easier to raise capital and transfer ownership. It also offers some tax advantages.
So how to convert an LLC to a C Corporation?
There are three possible ways to convert your LLC:
1. Statutory conversion
This is a popular and perhaps the simplest process to convert the LLC to a C Corporation. You can automatically convert the LLC’s assets and liabilities of a C Corporation without the need to dissolve the LLC. You will simply need the Certificate of Conversion and any other documents required by the state and to pay the filing fee.
2. Statutory merger
Another option would be to convert through a statutory merger. This is more complex and should only be done if the state doesn’t allow statutory conversions. Statutory mergers focus on converting LLC members into shareholders once they approve of a plan of merger. Their membership interests will be converted into shares. The Certificate of Merger and any other relevant documents must be filed within the state in addition to filing documents to dissolve the LLC. It is recommended that you work with an attorney should you choose to use this method of conversion.
3. Non-statutory conversion
Non-statutory conversion does not allow LLC assets and liabilities to be automatically transferred to the new C Corporation but requires special agreements to exchange LLC membership interests into corporate shares and to transfer assets and liabilities. You will need to form a new C Corporation before the assets and liabilities are transferred into the C Corporation and before membership interests are exchanged for corporation shares. A non-statutory conversion is the most complicated and expensive choice and should be avoided. If this is the only way you can convert your LLC to a C Corporation, please seek expert legal assistance.
P.S. This is not legal advice. Please seek your own legal advice based on your own personal situation. If you don’t have your own attorney, Firstbase.io offers free tax and legal consultations as part of our all-in-one service.
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