Key Takeaways:

  • The Delaware conversion statute provides a straightforward method for converting business entities without needing to dissolve the original entity.
  • Conversion allows an LLC to become a corporation or vice versa while transferring all assets, liabilities, and obligations automatically.
  • Filing requirements include a Certificate of Conversion and either a Certificate of Incorporation or a Certificate of Formation, depending on the conversion type.
  • Businesses must comply with Delaware General Corporation Law (DGCL) and LLC Act provisions when converting.
  • The approval process for conversions varies depending on the entity type and governing documents.
  • Tax implications should be carefully considered before conversion, as switching from an LLC to a corporation can affect tax treatment.
  • Additional steps after conversion include updating business licenses, contracts, bank accounts, and internal governance documents.
  • Businesses can also domesticate in Delaware if they are incorporated in another state but want to move their registration.

Delaware LLC conversion is possible, even if you're currently an S corporation. If you would like to convert your company to an LLC business structure, here is what you need to know. 

Delaware's Conversion Statute 

If you are currently a corporation that has considered converting to an LLC, you will be happy to know that there is a new, simplified process to do so. All you need to do is complete a few simples forms and then file with the Secretary of State. This is what's referred to as "statutory conversion."

After this process is complete, all of your assets and liabilities will be transferred to your new LLC. Best of all, unlike other types of conversion, you will not need to form a separate LLC prior to conversion. Within the state of Delaware, you also do not need to dissolve your corporation. Instead, the corporation will continue to exist in the form of an LLC. 

Before your corporation can convert into an LLC, all shareholders must approve before any paperwork is filed with the Secretary of State. In most cases, a majority vote will lead to approval. To verify, please refer to your articles of incorporation. 

Delaware General Corporation Law and Conversion Requirements

The Delaware General Corporation Law (DGCL) provides specific rules for business entity conversions. Under Section 266, a Delaware corporation can convert to another entity type, including an LLC, by following statutory guidelines. This process requires:

  • A majority shareholder vote for approval (previously, unanimous consent was required).
  • Filing a Certificate of Conversion and Certificate of Formation (for LLC conversions).
  • Ensuring all debts, liabilities, and obligations transfer to the newly formed entity.

The conversion takes effect upon successful filing, and businesses can choose a future effective date if desired. Delaware also allows foreign entities to domesticate under its jurisdiction using a similar process.

How to File for Conversion from Texas LLC to Delaware C Corp

The first step will be to file a Certificate of Conversion Form, including your Certificate of Incorporation. Once you have completed this task and paid all associated fees, you must then file the Texas Certificate of Conversion. Please ensure that you have included all relevant information, including filed franchise tax reports and proof of all paid franchise taxes.

To submit your Texas Certificate of Conversion, know that there is a $300 flat fee. 

Tax Implications of Delaware Business Conversions

When converting an entity in Delaware, tax treatment is a critical consideration. Some key tax aspects include:

  1. Corporate vs. Pass-Through Taxation – Corporations are subject to double taxation (corporate and personal levels), whereas LLCs offer pass-through taxation.
  2. S Corporation Status – If electing S Corporation status, the entity must file IRS Form 2553 and meet IRS ownership restrictions.
  3. Capital Gains and Tax Liabilities – The IRS may treat conversions as liquidations, triggering capital gains taxes for shareholders.
  4. Franchise Taxes – Delaware corporations must pay annual franchise taxes, which differ from LLC taxation rules.

Consulting a tax advisor before conversion can prevent unexpected tax burdens.

Certificates Needed for Corporation Conversion to LLC

When completing your certificate of conversion, you will need to include basic information about your new LLC. This will include the name and address of this new entity, as well as your LLC's registered agent. If you do not yet have one, this is something you'll need to consider. 

You can obtain blank templates in PDF form from the Delaware Secretary of State. The Certificate of Formation and Certificate of Conversion forms may seem straightforward, but you should expect some possible complications. This is why legal assistance is often recommended during this transition. 

Additional Legal Considerations for Business Conversion

Apart from filing the necessary certificates, businesses should evaluate other legal aspects of conversion, including:

  • Updating Operating Agreements or Corporate Bylaws – Converted entities must draft governance documents in accordance with Delaware law.
  • Intellectual Property (IP) Transfers – Patents, trademarks, and contracts may require assignment to the new entity.
  • Compliance with Securities Laws – Stock conversions may involve SEC regulations if shares are publicly traded or issued to multiple investors.
  • Employment Agreements – Employee contracts should be reviewed to ensure a smooth transition.

Legal professionals can assist in addressing these concerns and ensuring full compliance with Delaware regulations.

Additional Steps in the Conversion from Corp to LLC

Aside from the steps mentioned above, you will also need to address the following tasks when forming and running a new LLC:

  • Drafting an operating agreement for your LLC — which may require legal counsel.
  • Notifying all suppliers, clients, and customers regarding your new LLC status.
  • Holding a manager or member meeting to discuss all related changes. Keep records of this meeting.
  • Separating all personal and business finances.
  • Using the LLC's official name on all business documents.
  • Paying annual taxes in Delaware based on your LLC's profits.  

Following all formalities will be critical in maintaining your limited liability status. 

The Role of Business Contracts in Entity Conversion

Many businesses have contracts, leases, and agreements that could be affected by conversion. Some key areas to review include:

  • Commercial Leases – Some landlords may require re-negotiation or approval before transferring a lease to the new entity.
  • Loan Agreements – Banks and lenders might enforce due-on-sale clauses, requiring full repayment upon conversion.
  • Vendor and Supplier Contracts – These should be updated to reflect the new entity name and structure.
  • Regulatory Licenses and Permits – Businesses operating in regulated industries (e.g., healthcare, finance) may need new licensing under the converted entity.

Failing to address contractual obligations could disrupt business operations.

What Information Is Needed for the Certificate of Conversion?

When converting to an LLC, the Certificate of Conversion will include the following information:

  • The date and location regarding when and where the entity was first created.
  • The name and type of entity prior to filing LLC conversion.
  • The future effective date of an LLC. 

Filing Fees and Processing Times for Delaware Conversions

Converting a business in Delaware involves filing fees, which vary based on the entity type and document length. As of 2023, the following fees apply:

  • Certificate of Conversion (1-page) – $164, plus $9 for each additional page.
  • Certificate of Incorporation – $89, plus $9 for additional pages.
  • Expedited Processing – Available for an additional fee (varies based on processing speed).

Most filings are processed within 10-15 business days, but expedited services can reduce this to 24-48 hours.

Questions to Answer Before Conversion

If you have ANY questions or concerns, now is the time to ask. Before you seek conversion, make sure you have a thorough understanding of what is required of you. To guide you, here are some of the questions you need to ask yourself and, if required, your attorney. 

  • Within the state in question, what are the rules around conversion? For example, would you be able to complete a statutory conversion or would you need to do a merger?
  • Under the state's rules, what is required for approval? Do all shareholders need to approve? Do two-thirds of shareholders need to approve? This will vary from state to state.
  • What specific documentation is required and what should be included in this paperwork?
  • Will the company's existing capital require tax counsel? Will the company take a hit in regard to phantom stock?

Filing Fees and Processing Times for Delaware Conversions

Converting a business in Delaware involves filing fees, which vary based on the entity type and document length. As of 2023, the following fees apply:

  • Certificate of Conversion (1-page) – $164, plus $9 for each additional page.
  • Certificate of Incorporation – $89, plus $9 for additional pages.
  • Expedited Processing – Available for an additional fee (varies based on processing speed).

Most filings are processed within 10-15 business days, but expedited services can reduce this to 24-48 hours.

Frequently Asked Questions

Q1: What is the Delaware conversion statute?The Delaware conversion statute allows businesses to change entity types (e.g., LLC to Corporation) without dissolving the original entity. The process is streamlined under Delaware General Corporation Law (DGCL) Section 266.

Q2: What documents are required for a Delaware LLC to Corporation conversion?You must file a Certificate of Conversion and a Certificate of Incorporation with the Delaware Division of Corporations. Additional documents, such as corporate bylaws, may be necessary.

Q3: How long does it take to process a Delaware entity conversion?Standard processing takes 10-15 business days, but expedited services can complete the conversion within 24-48 hours for an additional fee.

Q4: Does converting an entity affect business contracts and licenses?Yes. Many contracts, including leases, vendor agreements, and loans, may require updates or approvals. Regulatory licenses and permits may also need to be reissued.

Q5: How does entity conversion impact taxes?Conversion can trigger capital gains taxes, affect franchise tax obligations, and alter corporate income tax filings. Consulting a tax professional is advisable before conversion.

If you need help with Delaware LLC conversion, post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.