Before I actually see an attorney about doing this I want to know if it's possible to simply convert a corporation to an LLC WITHOUT forming an LLC and then transferring from the Corp to the LLC and dissolve the Corp. Is there some process where you can just switch over?
In many jurisdictions one can simply file a Certificate of Conversion. Georgia has such a provision whereby you file a Certificate of Conversion:
§ 14-11-212. Conversion to limited liability company
(a) A corporation ... may elect to become a limited liability company. Such election shall require (1) compliance with Code Section 14-2-1109.1 in the case of a Georgia corporation, or (2) the approval of all of its partners, members or shareholders (or such other approval or compliance as may be sufficient under applicable law or the governing documents of the electing entity to authorize such election) in the case of a foreign corporation, foreign limited liability company, limited partnership, foreign limited partnership, general partnership, or foreign general partnership.
(b) Such election is made by delivering a certificate of conversion to the Secretary of State for filing. The certificate shall set forth:
(1) The name and jurisdiction of organization of the entity making the election;
(2) That the entity elects to become a limited liability company;
(3) The effective date, or the effective date and time, of such election if later than the date and time the certificate of conversion is filed;
(4) That the election has been approved as required by subsection (a) of this Code section;
(5) That filed with the certificate of conversion are articles of organization that are in the form required by Code Section 14-11-204, that set forth a name for the limited liability company that satisfies the requirements of Code Section 14-11-207, and that shall be the articles of organization of the limited liability company formed pursuant to such election unless and until modified in accordance with this chapter; and
(6) A statement setting forth either (A) the manner and basis for converting the ownership interests in the entity making the election into interests as members of the limited liability company formed pursuant to such election or canceling them, or (B)(i) that a written operating agreement has been entered into among the persons who will be the members of the limited liability company formed pursuant to such election, (ii) that such operating agreement will be effective immediately upon the effectiveness of such election, and (iii) that such operating agreement provides for the manner and basis of such conversion or cancellation.
I have done several in other states and the process is fairly simple.
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You need to see a tax attorney first because the "conversion" that you are attempting may trigger capital gain or related tax attributes that may prohibit your transer/dissolution strategy. If your corporation has substantial assets, the transfer is not going to be simple because the asset transfer may trigger capital gain to you. Your problem may not be whether Geogia law allows you to do this, but whether federal tax law penalizes you for your "simple conversion."
Phillip M. Smith Jr.
Los Angeles Tax & Business Attorney
Call: 855 IRSTAXBIZ
THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. The answer to question does not create an attorney-client relationship or otherwise require further consultation. Mr. Smith is licensed to practice law throughout the state of California with offices in Los Angeles County. He is authorized to handle IRS matters throughout the United States, and is also licensed to practice before the United States Tax Court. His phone number is 323-292-4116 or his email address is firstname.lastname@example.org.
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Construction / Development Lawyer
If it is a Georgia corporation you may convert it to a LLC without creating a new entity. What you outlined above is NOT a conversion, it is a transfer from one entity to another. In a conversion, the entity is the same but changes form--it is the same fictional entity but in a different form. This may still have some tax consequences but generally not those triggered by a "sale" of assets. It may also require titled assets to be retitled (vehicles, land) but not in all circumstances. If there are professional licenses, permits and similar matters involved there may be issues to address in advance. If your corporation was formed in another state, that state may have similar mechanisms.
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