Law On Partnership And Corporation Pdf Hector De Leon Pdf
Myong Killings
Limited Liability Companies (LLCs) are habitually the preferred corporate structure for startups and small business owners. In many ways, they are also the most practical form for small companies who do not need or seek outside investment and do not envision significant growth. An LLC is a hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.
Conversely, a C Corporation (C-Corp) requires small business owners to plan ahead at the initial stages of formation such that stock authorization; board of directors; determining the relationship between the company and the stockholders; and other critical decisions are at the very forefront of setting up the corporation. A C Corporation is the most common type of corporation because it offers unrestricted growth capability via stock sales which in turn means outside investors and venture capitalists find this arrangement more attractive, in most scenarios.
For those reasons, many LLCs desire to convert their corporate form to a C-Corp. In many instances, LLC owners are told by outside investors that they must convert their entity before the investor will truly consider making an investment. An LLC can convert either to a domestic C-Corp (e.g. a Texas LLC will become a Texas C-Corp) or, alternatively, the LLC can convert to a Delaware C-Corp.
The Texas Conversion Statute is detailed in Chapter 10 of the Texas Business Organizations Code (Link here: CH. 10: Texas Mergers & Conversions). To convert a Texas LLC to a Texas corporation, the following must be done: (i) file a certificate of conversion including a certificate of account status with the Secretary of State; (ii) file a certificate of formation with the Secretary of State; and (iii) adopt a plan of conversion and file it with the Secretary of State.
De Leon & Washburn, P.C. This article is provided for informational purposes only. It is not intended as legal advice nor does it create an attorney/client relationship between De Leon & Washburn, P.C. and any readers or recipients. Readers should consult counsel of their own choosing to discuss how these matters relate to their individual circumstances. Articles are not continuously updated, and De Leon & Washburn, P.C. makes no warranty or representation regarding accuracy or completeness.