Converting a Wyoming LLC to a Delaware C-Corporation when an investor asks

Both Wyoming and Delaware let a company convert into a different kind of entity in another state without closing down and starting again. In Delaware, the LLC files a certificate of conversion together with a certificate of incorporation, and in Wyoming it files the state's paperwork recording that it has converted out. The result is the same legal person, now a Delaware corporation, with the LLC's contracts, bank accounts and obligations carried over automatically. The other route, forming a new corporation and merging the LLC into it, gets to the same place with more paperwork.

1. 1

   The plan of conversion

   A document the LLC's members approve, setting out the terms: what each member's interest becomes in shares, how many shares the corporation can issue, and its bylaws and directors. The lawyer handling the round usually drafts it.

2. 2

   The Delaware filings

   A certificate of conversion and a certificate of incorporation, filed together with the Division of Corporations. The state's fees for the pair start at $293, plus Delaware's expedited service if the round can't wait.

3. 3

   The Wyoming filing

   The state's conversion filing, recording that the Wyoming LLC has become a Delaware corporation, for $60, the fee Wyoming charges for any LLC filing it doesn't price separately. Wyoming then shows the company as converted.

4. 4

   The corporate paperwork

   Bylaws, the first board consent, stock issued to the former members in the agreed proportions, and 83(b) elections within 30 days for any stock that vests.

5. 5

   The EIN and the accounts

   Delaware gives the corporation a new charter, and the IRS says a new corporate charter needs a new EIN, applied for the same way as the first one. The bank, payment processors and every platform are then updated with the new details.

Converting a single-member LLC or a partnership into a corporation is generally treated as contributing the business to the corporation in exchange for its stock, which is usually tax-free under section 351 of the tax code when it's set up properly. The LLC's final Form 5472 or Form 1065 covers the period up to the conversion, and the corporation's Form 1120 covers the rest, so the lawyer and accountant agree the date. Form 5472 doesn't go away: a US corporation that's 25% or more foreign-owned attaches it to its own Form 1120 for its dealings with that owner. Your own country may treat the conversion differently, possibly as a taxable event, so ask before the date is set.

State fees come to about $353: Delaware's $293 for the two certificates and Wyoming's $60, more with Delaware's expedited service. The real cost is the lawyer's fees for the plan, the filings and the corporate documents, commonly a few thousand dollars and often paid out of the round's legal budget. Two to four weeks from decision to a corporation ready to sign a SAFE is typical.