One of the main reasons many LLCs in Delaware convert to C Corporations is to attract venture investment. The funding comes from investment banks and rich investors. If you are trying to convert your LLC to a corporation, you might wonder how difficult the process is. Does converting Delaware LLC to C Corp involve a lot of complex steps? How to make it simpler?
Difficulty in Converting Delaware LLC to C Corp
It is easy if you have proper guidance. Because it is a significant step for the long-term success of your business, you need to carefully plan it. You must also thoroughly understand the entire process.
Legal Steps
- The LLC members must formally approve the decision to convert to a C Corp. It is done through a vote or written consent.
- Then, you will have to file an amended certificate of formation. The form can be obtained through our corporate processing service. This document outlines the changes to your business structure, including the conversion from an LLC to a C Corp.
- Adopting bylaws is another step to take when converting your LLC. C Corporations have certain governance requirements, including adopting bylaws that outline how the corporation will be managed, the roles of directions and officers, and procedures for shareholder meetings.
- C Corps has the ability to issue different classes of stock. Thus, you will need to allocate and issue shares to reflect ownership among shareholders.
Tax Implications
There are tax considerations that you and the other owners must need to comprehend. Under C Corporation, your profits are taxed. Shareholders are also taxed on dividends received. This potential increase in overall tax liability should be weighed against the benefits of the C Corp structure.
Election of S Corporation Status
After conversion, you may pick S Corporation status with the IRS. It allows for pass-through taxation similar to an LLC. However, this option has specific eligibility requirements and administrative obligations.
Formalities
C Corps involves administrative formalities, including holding regular shareholder meetings, maintaining detailed records, etc. This additional burden can be a challenge for some of your partners.
Professional Guidance
Because of the legal complexities involved, it is vital to seek professional guidance. Engage legal and financial advisors who specialize in business conversations and Delaware corporate law to provide you with invaluable insights. They can help you navigate the process correctly and make informed decisions.
Preparing the Documents
Another thing about converting your company to a C Corp is the paperwork. Thankfully, you can easily procure those documents by using our processing service. Having the right documents will ensure compliance with Delaware’s state regulations.
The forms available through the Corporate Center simplify the preparation process. We provide a convenient way to access these forms for various entities in Delaware and other US states. Use these resources to help you navigate the paperwork of converting Delaware LLC to C Corp with ease and confidence. If you need further help, please contact us by phone or email.
