The state of Delaware’s Division of Corporations allows for changes to a corporate entity via amendments, restated certificates, designations or conversions. Changes can be made at any time throughout the life of the entity.
For example, if you want to convert a Delaware Limited Liability Company (LLC) to a General Corporation, you can. There are many reasons why owners of an LLC may choose to change the entity to a corporation.
In my experience, however, the reason is almost always that the company needs to be able to issue shares of stock in order to bring on investors or raise venture capital.
Delaware corporate law specifically states:
“Any other entity may convert to a corporation of this State by complying with subsection (h) of this section and filing in the office of the Secretary of State”
(§ 265 Conversion of other entities to a domestic corporation)
The filing requires two properly completed and signed documents be submitted to the state of Delaware:
A Certificate of Conversion is the document filed to effectively change from one entity type to another with Delaware’s Division of Corporations. The filing must specifically state the following:
The Certificate of Incorporation is required to create the corporation. This document must have the following information listed:
Lastly, the $300 Delaware Franchise Tax for the LLC must accompany the filing for the current and following years that are due. For instance, an LLC converting to a corporation during the year 2023 would owe the $300 tax for the year 2022 (if not already paid by the June 1 deadline) AND $300 at the time of the filing (for the year 2023). It would then owe its annual corporation Franchise Tax on March 1, 2024 (for the year 2023). Effectively, it is taxed twice for the year of the conversion because it operates as both an LLC and a corporation for some amount of time during that calendar year.
Once the Certificate of Conversion and the Certificate of Incorporation are executed and the Delaware Franchise Taxes are paid, the filing can be submitted to the state.
The state of Delaware will approve the filing by affixing a time-date stamp to the documents. Once the filing is completed, the entity will be a valid Delaware corporation with a legal existence.
However, keep in mind that the Delaware Franchise Tax will no longer be $300, nor will it be due on June 1 of each year. Franchise Tax for a corporation is due annually on March 1, and the amount due will depend on the number of authorized shares of stock in your company.
A Delaware corporation’s Franchise Tax/annual report fees are based on the number of shares the corporation has authorized. A company with 1-5,000 authorized shares is assessed a $225 Franchise Tax fee; a company with 5,001-10,000 authorized shares is assessed a $300 Franchise Tax fee; and a company with more than 10,001 will be assessed a minimum fee of $450 for Franchise Tax.
Our Franchise Tax calculator can help determine what a company’s annual Franchise Tax will be if it is a corporation with more than 10,001 shares of stock.
Please feel free to call our team of experienced corporation specialists at 800 345 2677, Ext. 6911 with any questions about the conversion process. We would be glad to assist.
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.
There are 5 comments left for How to Convert Your LLC to a CorporationMartin Kalin said: Thursday, November 26, 2020
Does the file number stay the same when a Delaware LLC is converted to a Delaware "C" corporation?HBS Staff replied: Tuesday, December 8, 2020
Yes, if the change is filed as a conversion (as opposed to just closing one company and opening a new one), the Delaware state file number will remain the same. You may or may not need a new EIN from the IRS. This is at the discretion of the IRS, and the responsible party for your company can contact the IRS to make this determination.Norman Greenberg said: Wednesday, August 26, 2020
Can an out of state LLC convert to a DE. corp?HBS Staff replied: Wednesday, August 26, 2020
Yes, that is generally something that can be done. You can find some info on converting to a Delaware company here - https://www.delawareinc.com/blog/convert-foreign-llc-corporation-delaware-company - and our team would be happy to assist you with the Delaware filings when you're ready!London Treece said: Tuesday, August 25, 2020
Hello, where can I get the certificate of conversion form? I have a DE LLC through HBS that I would like to convert.HBS Staff replied: Wednesday, August 26, 2020
The certificate itself can be found on the Delaware Division of Corporations website (https://corp.delaware.gov/). If you need assistance selecting the right form and filing it correctly, please contact our team at firstname.lastname@example.org.Jack Oswald said: Saturday, November 2, 2019
BTW we are a customer of HBS...we just completed an LLC to Inc. conversion. Can we use the LLCs EIN for the new Inc.? Or do we need to get a new one? We tried to get a new on online but got an error code having something to do with similar names.HBS Staff replied: Monday, November 4, 2019
Typically, an EIN is specific to the company it is obtained for. Usually we see clients obtain a new ein number anytime a new entity is formed. Feel free to call, email, or use our live chat if you have additional questions.kashif said: Monday, April 30, 2018
nice details hereHBS Staff replied: Tuesday, May 1, 2018
Thanks for reading our blog.