Filing the necessary paperwork to start your own firm, whether it be an LLC, a S corporation, or a C corporation, may sometimes seem like a step in the right direction. However, suppose you formed your firm as an LLC or corporation and, after some time has passed, you discover that you should have registered as a C or S corporation. So, what should you do now?
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Here are the steps you must take to convert your LLC to a corporation:
Determine the liabilities and tax consequences of your re-filing. For example, if an LLC transforms to a corporation, the transition may have negative tax consequences if the liquidation of the LLC results in a taxable event.
The LLC should be dissolved. “The key members must agree and vote to dissolve the limited liability company and execute the processes outlined in the operating agreement,. Follow your state’s LLC dissolution legislation if the operating agreement does not expressly say how the LLC should be disbanded.” “Write the Articles of Dissolution and submit them with the secretary of state’s office.”
Form a new company and register it. Consult with an attorney or a certified public accountant to draught your new Articles of Incorporation. Register the corporation’s name with the applicable entity in charge of approving fictitious or DBA names and file the new paperwork with the secretary of state. “If you have previously categorised your LLC to be taxed as a corporation, you do not need to resubmit Form 8832,” Nicholson recommends. “However, if your LLC was previously taxed as a partnership or sole proprietorship, you must submit Form 8832 and check box 6a to opt to be treated as a corporation.” You cannot convert your LLC into an S-corporation if it is a foreign company.
All licences and permissions from your previous LLC should be transferred to your new organisation. Contact all of the previous LLC’s licencing and permitting authorities and ask how to transfer the licences and permissions to the newly formed business.
Furthermore, each state has its own criteria for state taxes and fees, information that must be included in your Articles of Incorporation, record-keeping instructions, and other vital paperwork. Contact a business lawyer before filing any paperwork to obtain an expert’s advice on whether converting the LLC to a corporation is ideal for your firm and to ensure that all of your legal papers are correctly filled out to avoid future fines and limitations.