How to Change from a Corporation to an LLC

The process of changing from one business entity to another is called “statutory conversion.” Though statutory conversion is not offered in all 50 states, there are other ways to switch your business from a corporation to an LLC.

Statutory Conversion

Statutory conversion is the simplest way of transforming your business from a corporation to an LLC. The process may differ slightly depending on which state you’re in, but in general conversion entails:

• Preparing a plan for conversion
• Getting approval from all board members
• Filing a certificate of conversion with your state
• Paying the associated fee

You’ll want to check with your secretary of state’s office to see whether your state offers statutory conversion.

Statutory Merger

If your state doesn’t allow for statutory conversion, you may opt to merge your corporation with a new LLC—which requires you to create an LLC specifically for this merger. Similar to the conversion process, you will need to prepare a plan and obtain board approval before going ahead with the merger. But you will also need to take a few additional steps:

• Creating a new LLC in your state
• Filing a certificate of merger (aka articles of merger)
• Dissolving your corporation

This method is typically longer and more expensive than statutory conversion, but it offers a solution if conversion is not available to you.

Nonstatutory Conversion

A nonstatutory conversion essentially does what a statutory merger does, HOWEVER corporate assets and liabilities are NOT transferred over to your new LLC by the state. Instead, you’ll have to make agreements and file paperwork to successfully convert corporate shares into membership interest, and pass all corporate assets and liabilities over to your new LLC. If this seems like your best (or only) option, it’s a good idea to consult a legal expert before you make any decisions.