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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.
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: the Certificate of Conversion and the Certificate of Incorporation.
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, the 2017 LLC Franchise Tax is due June 1, 2018; in order to change the LLC to a corporation, that 2017 Franchise Tax must be paid as well as the 2018 Franchise Tax (since we are currently in 2018 and the LLC is still operating).
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 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. 6900 with any questions about the conversion process. We would be glad to assist.
THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND HARVARD BUSINESS SERVICES, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF DELAWARE’S CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.