Converting an LLC to a Corporation in Texas

Q: I made an error and should have registered my new company as a Texas corporation instead of a Texas LLC. Can you please help me correct this error?

Thank you to a client from Texas for this great question! When you’ve registered your business as a Texas LLC but what you really want is a Texas corporation, you’ve got two options. If your LLC has already been registered with the state, you can dissolve the LLC and form a new corporation, or you can file paperwork and convert your LLC to a Texas corporation. We’ll investigate both options.

How to Convert Your LLC to a Texas Corporation

When it comes to converting your Texas LLC to a Texas corporation, you have two options:

• Dissolution and Formation
  This option requires you to fully dissolve your Texas LLC and form a new Texas corporation. To dissolve your Texas LLC you’ll need to file a Certificate of Termination and pay the $40 filing fee. Once you’ve tied up all the loose ends of your LLC, you’ll be able to form a Texas corporation. Forming a Texas corporation costs $300. This means tha the cost of dissolving the LLC and forming a new corporation would be $340.

• Conversion
  You can convert your Texas LLC to a Texas corporation without dissolving your business. You’ll have to come up with a member-agreed upon Plan of Conversion, and file both a Certificate of Conversion of a Limited Liability Company Converting to a Corporation and a Certificate of Formation For-Profit Corporation. It costs $600 to convert a Texas LLC to a Texas corporation ($300 to file the Certificate of Conversion plus $300 for the Certificate of Formation for the corporation).

Note: Both the dissolution and conversion options are contingent on your LLC being in good standing with the Texas Secretary of State.

Why not just dissolve my LLC instead of converting it?

Dissolving your Texas LLC may seem like the better deal at a total cost of $340, but in general, conversion is easier and more popular because it allows companies to avoid the hassle of having to sell assets, pay the debts, and distribute profits of the LLC. However, every business will have different needs. If you’ve just formed your LLC and don’t have any assets involved with the LLC, dissolving your Texas LLC may be just what the doctor ordered.

How Do I Convert My LLC to a Texas Corporation?

In accordance with the Texas Business Organization Code 10.101, the LLC and its members must first create a Plan of Conversion that includes the name of the entity that is converting, what kind of entity it will convert to, and how members will settle any debts or membership interests before the conversion. The Plan of Conversion is not required to be attached to your conversion application, but Texas does require that you keep a signed plan of conversion on file at the principal address of the business.

To complete your Certificate of Conversion of a Limited Liability Company Converting to a Corporation, you’ll need:

• Name of the converting LLC.
• Jurisdiction of formation of the LLC.
• The date of formation of the LLC.
• The file number, if any, issued to the LLC issued by the SOS.
• Your written plan of conversion.
• Principal address of the converting business.
• Start date of the corporation, no more than 90 days in the future.
• Certificate of Tax Status from Texas Comptroller.
• Attached completed and signed Certificate of Formation of a For-Profit Corporation.
• Authorized signature and date.

How much will the conversion cost me?

The total cost of filing both the Certificate of Conversion and the Certificate of Formation is $600. If you are in a hurry,

Conversion filings cannot be completed online, and will need to be mailed, in duplicate, along with a check, money order, or credit card information (Form 807) to:

Mail:
Texas Secretary of State
P.O. Box 13697
Austin, TX 78711-3697

Fax:
(512) 463-5709

In-person:
James Earl Rudder Office Building
1019 Brazos St.
Austin, Texas 78701

In a hurry? Texas offers expedited service. You’ll need to include a written request for expedited handling, provide an email address and daytime phone number where you may be reached, and a add $25 to the filing fee.

What other steps will I need to take?

Once your LLC has become a corporation, you’ll need to treat it as such. This means that you’ll need to:

• Draft corporate bylaws.
• Hold an initial board meeting and record meeting minutes.
• Elect corporate officers.
• Appoint corporate directors.
• Issue stock.

We cover everything you need to know about Texas corporation startup and maintenance in our Texas Corporation guide.