Can I Convert a Corporation to an LLC in California?
Q: Can I convert a corporation to an LLC in California?
A: Yes. California allows corporations to convert directly to LLCs under Cal. Corp. Code § 1157 et seq. The conversion requires board and shareholder approval, filing Articles of Organization with the Secretary of State, and completing tax filings. The LLC automatically assumes all corporate assets and liabilities without separate transfers.
The Conversion Process
Obtain Required Approvals
Your board of directors must approve the conversion plan. Shareholders must then approve the conversion—typically by majority vote under Cal. Corp. Code § 1157. Document both approvals in corporate records.
File Articles of Organization
Submit Articles of Organization (Form LLC-1) to the California Secretary of State online at https://bizfileonline.sos.ca.gov/ or by mail to 1500 11th Street, Sacramento, CA 95814. The conversion becomes effective upon filing. The LLC automatically succeeds to all corporation assets, rights, and liabilities.
Complete Tax Obligations
File final corporate tax returns with the IRS and California Franchise Tax Board (FTB). Obtain a tax clearance certificate from the FTB before completing conversion. Pay all outstanding corporate debts and liabilities.
File Statement of Information
Within 90 days of conversion, file Form LLC-12 (Statement of Information) with the Secretary of State. Thereafter, file biennially during your filing month. The filing fee is $20. Failure to file incurs a $250 penalty and may result in suspension or forfeiture under Cal. Corp. Code § 17707.
Key Considerations
Tax Implications
Consult a CPA before converting. The IRS may treat the conversion as a taxable liquidation depending on your tax election. This could trigger corporate-level taxes or affect shareholder basis. A tax professional can help minimize consequences.
Business Continuity
Review existing contracts, licenses, and permits. Some may require amendment or re-registration under your new LLC name. Notify creditors, vendors, and customers of the entity change.
Professional Guidance
Conversion involves complex legal and tax issues. Retain a California business attorney and accountant to ensure compliance with all statutory requirements.
Contact Information
California Secretary of State
- Phone: (916) 657-5448
- Website: https://www.sos.ca.gov/
- Address: 1500 11th Street, Sacramento, CA 95814
This is general information, not legal advice.