The details of how to convert your Wyoming limited liability company (LLC) to a Wyoming corporation will vary depending on your specific situation. Because the tax consequences can sometimes be significant, you should consult with a tax adviser before undertaking any conversion.
Wyoming’s Conversion Statute
In Wyoming, you can use a relatively new, simplified procedure that allows you to convert your business from an LLC to a corporation largely by filing a few basic documents with the Secretary of State. This procedure, technically known as “statutory conversion,” automatically transfers your corporation’s property and obligations to the new corporation. Unlike other methods of conversion, only one business entity is involved: you do not need to separately form a corporation before the conversion can occur. The conversion procedure is codified primarily in Section 17-26-101 of the Wyoming Statutes (Wyo. Stat.).
To convert your Wyoming corporation to a Wyoming LLC, you need to:
Unlike most other states with conversion statutes, Wyoming does not explicitly require your LLC to prepare a written “plan of conversion.” (A plan of conversion usually contains the “terms and conditions” of the conversion, including the basis for converting LLC membership interests into corporate shares.) Moreover, compared to many other states, Wyoming’s conversion laws lack detail regarding the process for having your LLC approve the conversion. However, the law seems to suggest that you must look primarily to your LLC’s articles of organization for guidance. It is less clear whether you can or should also rely on any provisions regarding approval of conversions that may be contained in an operating agreement or other LLC agreement. And, there is no obvious indication of what rules apply if neither the articles of organization nor any other LLC document contain provisions regarding conversion approval. While you may want to look at Wyo. Stat. § § 17-26-101(c) and 17-26-101(e)(iii), ultimately you should strongly consider consulting with a local business attorney regarding the approval issue.
The conversion statement will contain basic information about the conversion, such as:
Regarding the last listed item, the statute itself does not specify what constitutes “proof” that the conversion was properly approved. A simple statement that the conversion was duly approved by the LLC members according to the articles of organization (or other relevant document) may well suffice. However, you should strongly consider consulting with a business lawyer regarding this point.
The articles of incorporation will contain information about your new corporation, including:
Also, the articles of incorporation must include a consent form for the appointment of a registered agent for the new corporation, which will contain name, address, and other contact information for the agent, as well as the agent’s signature. For your convenience, the Secretary of State publishes a document containing both a blank articles of incorporation form and blank registered agent consent form.
The conversion statement and articles of incorporation may appear straightforward; however, keep in mind that you need to determine the correct voting rules for your particular LLC regarding member approval of the conversion. Moreover, converting your particular business may involve unexpected complications. Therefore, and as mentioned earlier, you should strongly consider working with a business attorney to draft the required documents and otherwise assist you in completing the conversion process.
Your minimum filing fee for this process likely will be $100, which is the cost for filing the conversion statement, the articles of incorporation, and the registered agent’s consent to appointment.
Be aware that Wyoming’s conversion statute states not only that all of your LLC’s property, as well as all of its obligations, are automatically transferred to the new corporation, but also that any legal actions against your business may continue “as if the conversion had not occurred.” For more information, check Wyo. Stat. § 17-26-101(g).
The foregoing information explains the basic steps for converting from LLC to C Corporation. If you want to convert to an S Corporation, you will also need to file IRS Form 2553.
Apart from the foregoing steps, you will also need to take care of all the tasks normally associated with creating and maintaining a new corporation, such as:
It’s important that you follow all of these required formalities in order to ensure that your business continues to have limited liability and can take advantage of various potential tax benefits. For a more complete discussion of the steps involved in forming a corporation, consult Incorporate Your Business: A Legal Guide to Forming a Corporation in Your State, by Anthony Mancuso (Nolo).
One other key step in the conversion process is to make sure that no business contracts or agreements, such as bank documents, leases, licenses, and insurance, will be nullified by your business’s entity change.
The IRS makes clear in a 2004 bulletin that, generally speaking, it will tax a statutory conversion as though the LLC members formally transferred all LLC assets and liabilities to the corporation in exchange for stock, and then immediately liquidated the LLC. However, the specific tax consequences for LLC-to-corporation conversions vary from one case to the next. Because the tax consequences can sometimes be significant, you should consult with a tax adviser before undertaking any conversion.
Other Considerations and Information
Our main concern here has been converting the legal form of your business from an LLC to a corporation. However, if you’re seeking to convert your LLC’s tax status from partnership to corporation without changing the LLC’s legal form, you only need to file IRS Form 8832 (to be taxed as a C Corporation) or IRS Form 2553 (to be taxed as an S corporation). (By default, the IRS taxes a multi-member LLC as a partnership and a single-member LLC as a so-called “disregarded entity;” there is no separate IRS tax category for LLCs.) While the IRS forms for changing tax status are fairly straightforward, do be aware that this procedure—known as “Check-the-Box”—involves special eligibility criteria; you can find those criteria in the instructions included with the forms.
Keep in mind that certain considerations may affect the timing of your conversion. For example, if you are converting to a C Corporation in order to make your business more attractive to outside investors, you will probably need to convert before any investment occurs. Conversely, if outside investors are not at issue, but the specific nature of your LLC’s assets and liabilities will lead to an undesirable tax burden for the current tax year, you may need to at least temporarily delay the conversion.
For additional guidance on converting from an LLC to a corporation, check Corporations and S Corporations vs. LLCs. For information on conversion rules in other states, check Nolo’s 50-State Guide to Converting an LLC to a Corporation.