Q: We want to convert our LLC into a nonprofit. Can you help?
Thank you to a client from Arizona for that great question! In Arizona, you can convert an LLC into a nonprofit corporation by filing a Statement of Conversion. However, it’s not as easy as just filing a form. You first need the approval of all LLC members, and you’ll need to draft Articles of Incorporation and nonprofit bylaws as well. When changing the entity type of your business, it’s a good idea to consult an attorney or CPA. But we’ll tell you the basic steps.
1. Hold a vote.
According to Arizona law, you can only change the entity type of your LLC if you have the consent of all LLC members. Consult your Arizona LLC operating agreement to review your LLC’s own policy for making changes to the business. Your LLC might have different rules, but usually, holding a vote involves these steps:
- Hold a meeting of all members.
- Draft a member resolution to change the LLC into a nonprofit corporation.
- Vote on the resolution.
- Pass the resolution only if the vote is unanimously in favor.
- Save the resolution with your business records.
2. Choose a name for your nonprofit corporation.
The name of your Arizona nonprofit should clearly reflect the purpose of your organization and can’t be already taken by any other business or nonprofit organization in Arizona. You can find out if the name you want is available by searching the Arizona Corporations Commission website.
If the current name of your LLC fits the purpose of your new nonprofit, you can use the same name. You’ll just have to remove “LLC,” “limited liability company,” etc. from the name.
3. Complete Arizona Statement of Conversion.
To formally convert your LLC to a nonprofit, you’ll file a Statement of Conversion with the Arizona Corporations Commission. On this form, you’ll need to include:
- Converting entity name, meaning the current name of your LLC.
- Converting entity jurisdiction. In this case, Arizona.
- Date of formation. When you filed your LLC Articles of Organization.
- Converted entity name. The new name of your nonprofit.
- Converted entity jurisdiction. In this case, also Arizona.
- Converted entity type. In this case, corporation.
- Foreign entity mailing address. Not applicable if your nonprofit will be based in Arizona.
- Delayed effective date. Only if you don’t want your LLC to convert into a nonprofit corporation immediately.
- Signature(s) confirming that all LLC members have agreed to this conversion.
4. Attach Arizona Articles of Incorporation.
Along with your Statement of Conversion, you’ll need to attach Arizona Nonprofit Articles of Incorporation. You’ll need to write a basic description of the kind of work your nonprofit will do, the names and addresses of your directors and incorporators, and the name and address of your statutory agent (also called an Arizona registered agent), among other things.
How much does it cost to convert an LLC to a nonprofit in Arizona?
The total state fee is $140, which includes the $100 filing fee for the Statement of Conversion and the $40 filing fee for the Articles of Incorporation.
How do I submit my paperwork?
You’ll submit the Statement of Conversion, Articles of Incorporation, Cover Sheet, and filing fee together by mail or in person to:
Arizona Corporation Commission Corporations Division – Examination Section
1300 W. Washington St.
Phoenix, Arizona 85007
5. Adopt Nonprofit Bylaws.
Once you’ve legally converted your LLC into a nonprofit, you should hold an organizational meeting of your nonprofit board of directors to adopt nonprofit bylaws. Nonprofit corporations in Arizona are required by law to adopt bylaws. Similar to your LLC operating agreement, nonprofit bylaws dictate how your organization will be run, who has the power to make changes, and how your voting process will work, among other things. If you apply for 501(c)(3) status, you will need to submit your bylaws to the IRS.
Check out our guide to Arizona nonprofit bylaws.
6. Apply for a new EIN.
Pretty much any time a business changes its entity type, it needs a new EIN. You can apply for a new EIN directly from the IRS for free online, by mail, or by fax.
Learn How to Obtain an EIN Number.
7. Apply for 501(c)(3) status.
Many nonprofits apply for 501(c)(3) tax-exempt status with the IRS. To do so, you need to file IRS Form 1023. Obtaining 501(c)(3) status is a complicated, time-consuming process that will involve the IRS closely scrutinizing your nonprofit’s statement of purpose, bylaws, and finances, among other things.
Read our detailed 501(c)(3) Guide.