How to Convert an LLC to a Corporation in California

Setting up an LLC is much easier than establishing a corporation. It is often a cheaper option that requires less effort to maintain over time as well. As your company grows, however, it may outgrow the LLC model, which is too limited for some businesses, especially as they expand. California uses a relatively new law that allows for a more streamlined procedure to convert an LLC to a corporation. In fact, it only requires filing a single document with the Secretary of State.

The Basics of Statutory Conversion

Filling out this form will transfer all of the LLC’s assets and liabilities to the new corporation so you don’t have to create the corporation first and then shift assets and liabilities as you did before. You also do not need to take any extra steps to dissolve the LLC. As part of the conversion process, the LLC will simply no longer exist.

Developing a Plan of Conversion

Conversion requires that you develop a plan. The plan should include items such as:

  • The place of organization of the new corporation and the previous LLC;
  • The name of the new corporation;
  • The general terms and conditions of the conversion;
  • How membership interests will be converted into shares of the new corporation;
  • Further provisions of the articles of incorporation that are specific to the new form; and
  • Any other information that you deem necessary.

Your conversion plan can be very general, but it should address all of these issues and others that are required by the statute. It is a good idea to tailor this document to the unique needs of your business and its members.

Additional Steps for Your New Corporation

Conversion requires that you develop Articles of Incorporation as well. Your articles should include a specific statement of conversion. You also need to go through the formalities required to create your new corporation. This includes tasks like creating bylaws, issuing stock certificates, electing officers and directors, and holding your first board meeting.

Although California has made conversion easier, it is still a good idea to have an attorney help you navigate this process. Contact Integrated General Counsel to learn more or to set up an appointment.

Written by Integrated General Counsel

Our focus includes handling a variety of corporate matters and also includes litigation in state and federal courts. Our current practice includes providing transactional services and representing a variety of small and medium-sized companies as their outsourced general counsel.