California law regulates the creation and maintenance of business associations registered in the state. To conduct extensive business within California, a business must be registered with the California secretary of state. If you are the owner of a California limited liability company, or LLC, and you find that your business is growing or can attract outside investment, you may find it desirable to run your business as a California corporation. This requires filing an articles of incorporation with a statement of conversion with the secretary of state.
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Conduct a vote among LLC members, or owners, approving the conversion to a corporation. Under California law, a majority of owners of an LLC must agree to convert. The owners must agree on the terms and conditions of conversion, including the manner in which ownership interest in the LLC will be converted to ownership in the corporation, the text of the corporation’s articles of incorporation and where the new corporation is to be chartered.
Draft an articles of incorporation with a statement of conversion. The secretary of state does not provide a form for an articles of incorporation with a statement of conversion, but does provide a sample that contains the minimum statutory requirements (see Resources). At a minimum, you must include the name of the new corporation, a statement of purpose, the name and address of the corporation’s agent for service of process, the amount of shares the corporation is authorized to issue and the statement of conversion. Sign and date the articles of incorporation with a statement of conversion.
Include the correct statutory language in your articles of incorporation with statement of conversion. California law allows the statement of purpose for your corporation to read: “to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California.” The statement of conversion must read as follows: “The name of the converting California limited liability company is (name of LLC). The limited liability company’s California Secretary of State file number is (LLC’s file number). The principal terms of the plan of conversion were approved by a vote of the members, which equaled or exceeded the vote required under Section 17540.3. There is one class of members entitled to vote and the percentage vote required is a majority in interest of the members. The limited liability company is converting into a California stock corporation.”
File the articles of incorporation with statement of conversion.. You may only file via mail. The mailing address for the secretary of state is Document Filing Support Unit, P.O. Box 944260, Sacramento, CA 94244-2600. As of 2010, the fee for filing an articles of incorporation with statement of conversion is $150.
Tips & Warnings
While filing an articles of incorporation with a statement of conversion is simple, consult with a tax attorney about the financial implications of converting from a California LLC to a corporation.
References & Resources
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