All states permit the creation of single-member LLCs, which only require one owner. Converting a corporation with multiple shareholders to a single-member LLC requires carefully drafting a conversion plan for purchasing the ownership interests of all other shareholders. After obtaining approval of the conversion plan, you must file a certificate of conversion and inform the IRS of the change in status of your company.
Fit your business needs with the right LLC package
Create a conversion plan. Indicate the new LLC's name and the state where the LLC will be organized. Include a copy of the LLC's proposed Articles of Organization. The most important aspect of the conversion plan is providing a method for acquiring the ownership interest of any other stockholders of the corporation.
Obtain approval of the conversion plan. If your corporation has rules in its articles of incorporation or bylaws, follow those rules for conducting a vote among shareholders. If there is no applicable rule, state statutes generally require approval by a majority of all classes of shareholders to approve the conversion plan.
Fill out the certificate of conversion. Most state business entity registration agencies provide a form to fill out in order to convert a business entity. While the information required to fill out a form varies by state, you will generally need to provide the name of both your old corporation and the new LLC, disclose the percentage by which each class of shareholder approved the conversion plan, and possibly also provide the name and address of the registered agent of both your old corporation and new LLC.
File the certificate of conversion. The filing fee varies by state, but can range from $50 to $200.
File the articles of organization. The filing fee varies by state, but may range from $50 to $350.
File Form 8832 with the IRS (see Resources). As a single-member LLC, you may elect to be taxed by the federal government as either a corporation or a sole proprietorship. If you elect to be taxed as a sole proprietorship, your LLC will be “disregarded” and any profits and losses incurred by your LLC will be directly reported on your tax return.
- Conversion plan
- Certificate of Conversion
- Articles of Organization
- IRS Form 8832
References & Resources
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