(You may also want to read our related post, “How Do I Convert a Partnership, Corporation or Other Entity into an LLC?“)
The New York Limited Liability Company Laws and the Delaware General Corporation Laws have provisions to easily convert an existing limited liability company (and with respect to Delaware, general partnership, limited partnership, other unincorporated business entities) into a corporation. Perhaps the owners want to convert the original entity into a corporation for tax reasons or perhaps the startup company/partnership is seeking venture capital financing and the venture capital investors don’t want to invest in a partnership. Consequently, the business needs to convert to a corporation. How is a conversion of a partnership, LLC or other business entity to a corporation accomplished?
Under Delaware General Corporation Law Section 265 et seq., “Any other entity may convert to a corporation of this State” by complying with certain procedures. Under this Delaware General Corporation Law, the term “other entity” means “a limited liability company, statutory trust, business trust or association, real estate investment trust, common-law trust or any other unincorporated business including a partnership (whether general (including a limited liability partnership) or limited (including a limited liability limited partnership)), or a foreign corporation.” This provision allows for a conversion of an LLC, partnership, trust or foreign corporation (a corporation formed under any other States’ laws) into a Delaware corporation. If all of the procedures are followed, you will end up with a Delaware corporation where you used to have an “other entity” and the conversion will not “affect any obligations or liabilities of the other entity incurred prior to its conversion to a corporation of this State or the personal liability of any person incurred prior to such conversion.”
If you have a limited liability company formed under the laws of New York, look in Section 1001 et seq. of the New York Limited Liability Company Law. Under these provisions, a “a domestic limited liability company may merge or consolidate with or into one or more domestic limited liability companies or other business entities formed or organized under the laws of this state or any other state or the United States or any foreign country or other foreign jurisdiction”. Again, if all of the procedures are followed, your LLC can merge (or consolidate) with or into any other business entity.
If you are considering a conversion of a general partnership or limited partnership (or “other entity” in Delaware) into a limited liability company, make sure to check with your accountant and/or tax adviser and a New York Business Lawyer (or corporate attorney). There may be important tax and other legal consequences to consider before making the conversion of a partnership, LLC or other business entity to a corporation.