• August 2019
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Why can’t you start off as an LLC, and then turn into a corporation?

My answer to Why can’t you start off as an LLC, and then turn into a corporation?

Answer by Raad Ahmed:

You can start off as a limited liability company (LLC) and then turn into a corporation later so I’m not sure why everyone is telling you that. In some situations you may be easier to go ahead and start off as a corporation, but in other situations it is perfectly fine to start as an LLC and convert later. You should talk with an attorney about your goals and the specifics of your situation so you can evaluate potential options develop a strategy before making a decision.

You would likely need to make some changes to your structure to make the move work, but it can be done. The actual conversion process and its requirements will depend on the laws of the state in which you are incorporated but generally will involve some type of structural and tax changes. Generally, an LLC is less formal than a full corporation, so expect some formalities as a part of the change.

Another option is to just form a new corporation that will own the LLC, similar to what you said. The difference is that there is no sale of the product, the LLC is just wholly owned by the new corporation, which is owned by you and your partner. Essentially you are making a new corporation for the purpose of acquiring your existing LLC. It will still carry on business as an LLC, but the profits would pass through to the new corporation and in turn, to you and your partner as owners of the corporation.

Again, I would suggest that you talk to an attorney so that you can look over all options and determine the best strategy for your company before you make a decision. An experienced attorney will be able to walk you through your options and help you develop a strategy tailored to meet your specific goals. If you are looking for an attorney or just have more questions I invite you to check out LawTrades where we will match you with a top attorney for a free consultation. All of our attorneys are experienced and there is no obligation to retain the attorney after the initial consultation. Good luck to you!

Why can’t you start off as an LLC, and then turn into a corporation?