Delaware may not be one of the smaller states, but its business climate has attracted businesses of all kinds due to its welcoming tax policies and robust corporate laws. Furthermore, Delaware offers an easy process for converting existing entities to Delaware-registered corporations.
Converting involves creating and filing a plan of division, outlining how the company will split into two separate LLCs, then filing Certificates of Conversion with the appropriate authorities.
Legality
Entrepreneurs frequently opt to convert their business entity to a Delaware corporation for several reasons, including increased flexibility when it comes to equity distribution and more established corporate laws that make attracting investors easier.
Corporations must keep detailed records of their assets and liabilities to facilitate taxation purposes, while annual reports must also be filed with the state. Furthermore, when transitioning from LLC to Delaware corporation status you will need to file a Certificate of Conversion with them as well.
Converting your LLC is generally straightforward, although there may be exceptions. For instance, New York does not permit statutory conversions; therefore you must form a separate corporation first before converting. Although this approach requires more effort, it could be beneficial if your business contains significant equity or is seeking external investments.
Taxes
Converting from a partnership or LLC into a corporation can have significant tax and legal ramifications, so it is wise to consult your accountant or tax adviser prior to taking this step. Also consider meeting with a New York business lawyer.
Delaware boasts some of the nation’s best corporate laws, making it an attractive location for many companies looking to relocate. Furthermore, its legal system is highly respected.
Switching from LLC to Delaware corporation can save both time and money. Converting from an LLC to Delaware corporation requires little work, as there are typically only minimal fees involved. Before undertaking this transition, however, make sure there are no violations with existing business contracts or agreements; changing legal structure could render them invalidated.
Governance
There may be various reasons why a business might decide to convert from an LLC to a Delaware corporation. One is due to venture capital investors favoring C-Corps with more formal governance structures and shareholder protection measures; another factor could be that LLC structures are less tax efficient for fast-growth technology companies with significant equity compensation awards than C-Corps are.
Converting to a Delaware corporation involves filing documents with the state of Delaware and changing your company name. Furthermore, business should ensure no contracts, bank accounts or agreements are compromised as part of this transition process. Furthermore, state or local requirements must also be considered when switching entities.
Reincorporation refers to various transactions that allow entities to relocate from their home states or switch types of business entity structures. While statutory mechanisms exist for reincorporation, it should not be attempted on your own; you should consult with an experienced New York Business Lawyer so all documents are filed correctly.
Requirements
There may be many compelling reasons for converting from an LLC to a Delaware corporation, such as seeking outside investors or taking advantage of certain tax benefits. Whatever the cause for converting, it’s crucial that companies consult with an experienced New York business lawyer prior to undertaking this transition.
Filing paperwork with the State of Delaware to convert from an LLC to a corporation involves following a particular procedure and filing what’s known as a Certificate of Conversion document, which contains certain pieces of information regarding formation date, name of LLC and conversion to corporation date.
Additionally, another document must be filed when transitioning an LLC into a corporation: its Certificate of Incorporation. This document includes information such as its purpose, purpose/number/par value/incorporator details. Once filed, you can begin transitioning towards your new corporate structure.
