Delaware law provides a specific process for converting a Delaware S-corporation to a Delaware limited liability company, or LLC. After conducting a vote among stockholders in the S-corporation, you must file both a Certificate of Conversion and a Certificate of Formation with the Delaware Secretary of State. After converting, you must also inform the Internal Revenue Service of the change in status of your company and amend the way in which the IRS taxes your new LLC.
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Create a conversion plan as specified by Delaware law. At a minimum, a conversion plan must include the name of the new LLC, and provide a plan for converting the S-corporation's shares of stock, property or cash into the ownership of the LLC.
Conduct a vote among S-corporation stockholders authorizing the conversion to an LLC. Under Delaware law, a majority of all classes of stock owners must authorize the conversion from an S-corporation to an LLC.
File an annual report for your S-corporation. Before submitting your Certificate of Conversion, contact the Delaware Secretary of State -- at 302-739-3073 or DOSDOC_Ftax@state.de.us -- to determine whether your S-corporation owes any franchise tax or penalties, which must be paid before you can do the conversion. You can pay your S-corporation’s franchise taxes online (see Resources).
Download the Certificate of Conversion and Certificate of Formation from the Delaware Secretary of State’s website (see Resources). For convenience, the Delaware Secretary of State makes both forms available for download in one file.
Fill out the Certificate of Conversion. Provide the jurisdiction where the S-corporation was first formed and where the S-corporation is domiciled at the time of filing. Provide the date when the S-corporation was formed and the name of the S-corporation. Provide the name of the new LLC. Sign and date the Certificate of Conversion.
Fill out the Certificate of Formation. Provide the name of the LLC. Provide the address of the LLC’s registered office and the name of the LLC’s registered agent. You have the option of including any other provisions in the Certificate of Formation. Sign and date the Certificate of Formation.
File the Certificate of Conversion and Formation. As of 2010, the filing fee for a Certificate of Conversion is $200, and the fee for filing a Certificate of Formation is $90. You must pay by certified check made payable to the Delaware Secretary of State. The filing address is Division of Corporations, P.O. Box 898, Dover, DE 19903.
File Form 8832 with the IRS (see Resources). Depending on the structure of your LLC, you may elect to be taxed as a corporation, partnership or sole proprietorship. You must indicate that you have previously filed as a corporation and that the type of business entity has changed, even if you continue to elect to be taxed as a corporation by the IRS.
- Certificate of Conversion
- Certificate of Organization
- IRS Form 8832
Tips & Warnings
It may be best to consult with an attorney about the financial implications of converting from an S-corporation to an LLC.
References & Resources
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