To change an LLC to a corporation, most states let you file a statutory conversion: you draft a Plan of Conversion, get member approval, file Articles of Incorporation and conversion paperwork with the Secretary of State, and then update your tax elections and business registrations. The LLC becomes a corporation by operation of law, keeping the same legal identity along with its contracts, debts, and obligations. A handful of states do not offer statutory conversion and require a merger or asset transfer instead, which changes the mechanics but not the internal steps.
Pick the Right Conversion Method for Your State
Statutory conversion is the cleanest route. You file conversion documents, and every asset, liability, and contract moves to the corporation automatically. No one has to reassign leases, re-title property, or chase down counterparty consents.
Roughly five states do not permit statutory conversion of an LLC to a corporation. If yours is one of them, you have two alternatives:
- Statutory merger. You form a new corporation, merge the LLC into it, and dissolve the LLC. The surviving corporation inherits all assets and liabilities.
- Asset transfer (non-statutory conversion). You form a new corporation, transfer each asset and liability individually, exchange membership interests for stock, then dissolve the LLC. This route often requires re-titling property, reassigning contracts, and getting consent from third parties.
Whichever method your state uses, the internal work is the same: draft a plan, get members to approve it, and prepare the corporate governance documents.
Draft a Plan of Conversion
The Plan of Conversion is the blueprint for the transition. Requirements vary by state, but the plan generally covers:
- The LLC’s current legal name as it appears in state records.
- The new corporate name.
- A statement that the LLC is converting to a corporation in a specific state.
- How membership interests will translate into corporate shares, including the ratio and any different classes of stock.
- The full text of the proposed Articles of Incorporation.
- Any additional terms, such as the effective date or provisions for dissenting members.
Before drafting, read your operating agreement. It may set specific rules for conversions, including notice periods, supermajority thresholds, or rights of first refusal that shape how membership interests convert to shares.
Get Member Approval
State law requires a formal vote or written consent of the members. The threshold depends on two things: what your operating agreement says, and the state’s default if the agreement is silent. Under the Revised Uniform Limited Liability Company Act, which has influenced many state statutes, the default is unanimous consent of all members entitled to vote. Some states set the default at a simple majority or a supermajority such as two-thirds.
Once you reach the required approval level, record the decision in a written resolution or consent form signed by the approving members. That document goes into your conversion filing and proves the transition was authorized properly.
Prepare Articles of Incorporation and Bylaws
Converting to a corporation means creating two new foundational documents that take the place of your operating agreement.
Articles of Incorporation
The Articles of Incorporation (called a Certificate of Incorporation in some states) establish the corporation’s legal existence. At a minimum, they include:
- The corporate name, which must comply with state naming rules and typically ends in “Inc.,” “Corp.,” or “Incorporated.”
- The total number of authorized shares, broken out by class if you plan to issue both common and preferred stock.
- Par value, a nominal per-share value used for accounting. Many states allow no-par-value shares.
- A registered agent to receive legal documents.
- The names of the initial directors.
- A corporate purpose, which most states let you state generally as “any lawful business activity.”
If you expect to raise capital later, authorize more shares than you plan to issue at conversion. That gives you room to create new equity classes without amending the articles.
Bylaws
Bylaws replace the operating agreement as the corporation’s internal rulebook. They typically cover shareholder meetings and quorum requirements, the number and election of directors, officer roles, voting procedures, and any stock transfer restrictions. Bylaws are internal and generally not filed with the state, but they function as a binding agreement between the corporation and its shareholders, so have an attorney review them against your state’s corporate law.
File the Conversion With the State
Once the plan is approved and the corporate documents are ready, submit the package to your Secretary of State or equivalent business filing office. Most states accept online filings; mail is usually an option too. The package generally includes the Plan of Conversion (or a certificate summarizing it), the Articles of Incorporation, and any state-specific cover sheets.
Filing fees generally run $100 to $300, though some states charge more, particularly those that calculate the fee based on the number of authorized shares. Expedited processing is available in many states for an extra fee.
State review usually takes a few business days to a couple of weeks. Officials check that the documents meet statutory requirements and that the proposed corporate name is available. If everything is in order, the state issues a Certificate of Conversion or a stamped copy of the Articles of Incorporation as official proof. The effective date is normally the date of acceptance, though many states let you designate a future effective date.
Understand the Tax Consequences
Converting itself is usually not a taxable event. Section 351 of the Internal Revenue Code provides that no gain or loss is recognized when property is transferred to a corporation in exchange for stock, as long as the transferors collectively own at least 80 percent of the corporation’s voting power and 80 percent of every other class of stock immediately after the exchange.1Office of the Law Revision Counsel. 26 U.S. Code 351 – Transfer to Corporation Controlled by Transferor The control threshold is defined in Section 368(c).2Office of the Law Revision Counsel. 26 U.S. Code 368 – Definitions Relating to Corporate Reorganizations
In a typical conversion where members receive stock in proportion to their prior membership interests, the 80 percent test is easily met and no one owes tax on the exchange. Certain situations can still trigger a taxable event, including significant third-party debt beyond ordinary trade payables, or securities that are not economically equivalent to the prior membership interests. Talk to a tax professional before you file.
The corporate structure also changes how income is taxed going forward. A C-corporation pays federal income tax at a flat 21 percent on its profits, and shareholders pay tax again on any dividends they receive from those after-tax profits. Most LLCs, by contrast, are pass-through entities taxed only once at the members’ individual rates.
Electing S-Corporation Status
To keep pass-through tax treatment after converting, file Form 2553 with the IRS to elect S-corporation status. An S-corp generally avoids entity-level federal income tax; profits and losses pass through to shareholders’ personal returns.
The deadline is short. Form 2553 must be filed no more than two months and 15 days after the beginning of the tax year in which the election takes effect.3Internal Revenue Service. Instructions for Form 2553 For a calendar-year corporation, that means mid-March. Miss it, and the election waits until the next tax year, leaving you taxed as a C-corp in the meantime. S-corps also cap out at 100 shareholders, and every shareholder must be a U.S. individual or a qualifying trust.
Handle Your EIN
Whether you need a new Employer Identification Number depends on how the IRS treats the conversion. If the LLC simply changes its tax election to be treated as a corporation without terminating and forming a new entity, you generally keep your existing EIN. If the conversion involves terminating the LLC and creating a new corporation, which is how some non-statutory conversions work, you need a new EIN.4Internal Revenue Service. When to Get a New EIN
A statutory conversion treated as a mere change in tax classification does not require a new EIN. If you are not sure how your conversion will be classified, apply for a new EIN. The process is free, takes minutes online, and using the wrong EIN on payroll filings or tax returns can trigger penalties.
Update External Records After the Conversion
Once the state approves the conversion, several outside records need updating.
Banking and Financial Accounts
Give your bank a copy of the Certificate of Conversion or stamped Articles of Incorporation to update business accounts and loan documents. Banks generally want to see the official state filing before they change anything. If your EIN changed, update every financial institution with the new number.
Licenses, Permits, and Insurance
Notify any local, state, or federal agency that issued a license or permit to the LLC. Update workers’ compensation and general liability policies with the new entity name and, if applicable, the new EIN. Payroll providers also need the updated entity information so employment tax filings use the correct name and identification number.
Foreign State Registrations
If the LLC was registered as a foreign entity in other states, those registrations need attention. You typically withdraw the foreign LLC registration in each state and file a new foreign corporation qualification. Skipping this leaves you with duplicate registrations, ongoing LLC filing obligations, and potential penalties in states where the LLC is still on the books.
Stock Certificates
Issue stock certificates, physical or electronic, to shareholders as laid out in the Plan of Conversion. These replace the membership interests from the LLC and document each shareholder’s ownership. Keep a stock ledger that records every issuance, transfer, and cancellation as part of your ongoing corporate records.
Keep Up With Corporate Formalities
A corporation runs on more formal records than most LLCs. Every state requires corporations to hold annual shareholder meetings, elect directors, and keep written minutes. Major decisions such as authorizing new stock, approving large contracts, or taking on debt need to be documented through board resolutions.
Your ongoing corporate records should include meeting minutes, written resolutions for significant actions (including those taken by written consent), a current shareholder ledger, basic financial statements, and copies of the Articles of Incorporation and bylaws with any amendments.
These formalities protect your limited liability. Courts can pierce the corporate veil and hold shareholders personally liable for business debts if the corporation is treated as an alter ego of its owners, and failure to hold meetings or keep minutes is one of the most commonly cited factors when courts do so.
Most states also require corporations to file an annual report, sometimes called a statement of information, with the Secretary of State along with a filing fee. Missing that deadline can bring penalties, loss of good standing, or administrative dissolution. Put the filing date on the calendar as soon as the conversion is done.