Introduction
Changing a business from an LLC to a corporation can modify structure and taxes. An LLC is a pass-through entity, a corporation is not. LLC owners may want to convert to benefit from lower rates.
Benefits of Converting to a Corporation
One key benefit of converting from an LLC to a corporation is the ability to raise capital. Corporations can issue stock to investors, LLCs cannot. Becoming a corporation can increase available capital for scaling and growth.
Tax Implications and Process
Converting an LLC to a corporation can have tax consequences based on the transactions deemed to occur in the conversion.
Considerations for Conversion
Reasons to ditch an LLC for a C corporation include simplifying stock compensation and cutting taxes. If your LLC has outgrown its structure, transitioning may be appropriate.
Methods of Conversion
You can learn to convert your LLC to a corporation through:
- Statutory conversion – simplest method in most states
- Statutory merger – first form a new corporation then companies merge
- Cross entity merger – the LLC merges into an already existing corporation
FAQ: Converting LLC to C Corp
How hard is it to convert LLC to C Corp?
There are three different ways to change your LLC into a C Corp:
- Statutory conversion (supported by most states)
- Statutory merger
- Non-statutory conversion
Conclusion
From simplifying stock compensation to lowering taxes, there are multiple reasons to consider converting your LLC into a corporation.