Business Law

STATUTORY CONVERSION FORM LOCATOR MATRIX

Most states have statutory form documents necessary to convert an existing company from one entity form to another (e.g., converting a statutory corporation to an LLC). Whenever possible we recommend you use the statutory form because that is what the secretary of state or other governing agency will be most familiar with. In this matrix we have included links to as many statutory forms as possible, as well as the statutory references that allow for conversion.

CONVERSION FEE PROPOSAL LETTER TO CLIENT

This letter assembly both helps your clients understand the scope of the services you’ll render to them during a statutory conversion process, and also helps your office keep track of what steps are necessary to complete the conversion process. The letter is set up to contemplate a “time estimate factor” that you might then apply against your hourly rate. You can also use that time estimate factor to set your fixed fee for the conversion service, demonstrating to your client the scope of the value you’re providing with the service.

MODEL CERTIFICATE OF CONVERSION

This document may be used in those few jurisdictions that do not have a statutory form conversion document. It is imperative that if your state does not have a statutory conversion form, you verify that the model document contains the information necessary to effectuate the conversion. Use the matrix referenced above to expedite your research.

PLAN OF REORGANIZATION

When an S corporation is converted to an LLC taxed as an S corporation the directors and shareholders must enter into an agreement, or plan for reorganization. This plan is part of the corporate records to establish evidence that the company has complied with the Code and Regulations to avoid a taxable reorganization. This is an essential component of any statutory conversion from a corporation to an LLC, especially when the company is not changing the tax structure.

SPECIAL MEETING MINUTES OF REORGANIZATION

It is essential to properly document major decisions in the life and operations of a corporation, and few decisions are as significant as the conversion from a statutory corporation to another form of entity. These minutes memorialize the joint decisions made by the shareholders and the directors of a corporation as they move to convert a statutory C corporation or S corporation to an LLC. These minutes also outline the actions the company will take through the conversion process to help ensure that the formalities of conversion are properly followed.

CONVERSION TAX RETURN STATEMENT

This document should be attached to the client’s form 1120 or 1120S to provide background supporting information and documentation for a statutory conversion from a corporation to an LLC. The attachment states that the conversion was performed to comply with IRC sec. 368(a)(1)(F) and applicable Regulations to constitute “F reorganization.” The document also references the conversion plan required by the Regulations, and discussed above.