New York state does not allow statutory conversions to convert a corporation to an LLC. Accordingly, businesses must use alternatives such as statutory merger or non-statutory conversion. While many states do allow statutory conversion, each state has its own unique rules and forms.
Statutory Conversion Process
Steps for a statutory conversion generally include:
- Get conversion approval from the directors and prepare a plan.
- Put the conversion approval and plan to stockholders for voting.
- File a certificate of conversion and articles of organization.
- Pay the filing fee.
In states that don’t allow statutory conversions, like New York and about 15 others including Arizona, the alternatives are to proceed with either a statutory merger or a non-statutory conversion.
Alternatives to Statutory Conversion
Statutory Merger: This requires forming a new corporation with your LLC’s members as shareholders. Afterward, the shareholders:
- Approve a merger plan.
- Swap their LLC interests for corporate shares.
- Dissolve the LLC formally.
Non-Statutory Conversion: This involves:
- Forming a new entity.
- Merging your existing one into it.
The specific rules and forms required for statutory conversions or the aforementioned alternatives can vary significantly depending on the state.