If you have a startup, you have likely heard many\ntimes that you must be a Delaware Corporation. \nWhat happens if you formed as an LLC in your home state? <\/p>\n\n\n\n
Fortunately, Delaware allows for a simple entity\nconversion from a LLC (Delaware or non-Delaware) to a Delaware Corporation. Thus, founders can convert their company to a\nDelaware corporation without much fuss from a legal perspective. <\/p>\n\n\n\n
The\nprocess is straight-forward in that it requires only the filing of some basic\nforms, and does not require forming another corporation or dissolving the\ncurrent LLC. All of the current LLC\u2019s property is automatically transferred to\nthe new corporation, along with its debts and liabilities. <\/p>\n\n\n\n
That said,\nthe usual steps of the conversion process are as follows:<\/p>\n\n\n\n
1.<\/strong> Determine\nif the LLC\u2019s home state allows for entity conversion in Delaware.<\/strong> The\neasiest way to check if such a conversion is permitted is to review the\nguidelines for entity conversion on the Secretary of State\u2019s website of the\nLLC\u2019s respective home state. If the home state does not allow such a\nconversion, conversion is not impossible, but will be more complicated than\ndiscussed in this post. If the home state does allow for conversion to a\nDelaware corporation, then you can proceed to step two. <\/p>\n\n\n\n 2. Prepare a plan of conversion and get it\napproved by the current LLC members.<\/strong> The\nplan should meet the requirements of both the LLC\u2019s home state and Delaware. This\nplan of conversion must be approved in accordance with the LLC\u2019s governing\ndocuments and state law. To determine how many or what percentage of the\nmembers must approve the conversion, check the LLC\u2019s certificate of formation\nand operating agreement. <\/p>\n\n\n\n 3.<\/strong> File\nthe entity conversion documents in the home state and in Delaware.<\/strong> Following\napproval by the LLC\u2019s members and\/or managers, the applicable entity conversion\nforms required by the home state should be filed with that jurisdiction\u2019s\nSecretary of State, and the certificate of conversion and certificate of\nincorporation required by Delaware should be filed with Delaware\u2019s Secretary of\nState. <\/p>\n\n\n\n 4. Delaware Corporate Formalities.<\/strong>\nTasks normally associated with starting up a corporation will have to be\ncompleted such as drafting corporate bylaws, issuing stock certificates, etc.,\nso that the now-Delaware corporation continues to have limited liability. <\/p>\n\n\n\n IMPORTANT: Federal and state taxes, as well as business\narrangements such as contracts, leases, and insurance can be affected by an entity\nconversion, so please consult an attorney and tax professional to protect\nyourself from potential contract or tax issues. <\/p>\n\n\n\n Although this post lays out the basic outline of\nthe steps required for conversion to a Delaware corporation, potential tax\nissues, especially if the company has any debt, can make the process much more\ncomplicated. <\/p>\n\n\n\n It is tempting to try and save money by\ncompleting relatively straight-forward processes like the conversion process on\nyour own, there are drastic consequences if the process is completed\nincorrectly. <\/p>\n\n\n\n Please note that this article (1) is not provided in the course of and does not create or constitute an attorney-client relationship, (2) is not intended as a solicitation, (3) is not intended to convey or constitute legal advice, and (4) is not a substitute for obtaining legal advice from a qualified attorney.<\/span><\/p>","protected":false},"excerpt":{"rendered":" If you have a startup, you have likely heard many times that you must be a Delaware Corporation. What happens if you formed as an LLC in your home state? Fortunately, Delaware allows for a simple entity conversion from a LLC (Delaware or non-Delaware) to a Delaware Corporation. Thus, founders can convert their company to […]<\/p>","protected":false},"author":1,"featured_media":409,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"yoast_head":"\n