You’re fundraising… Should you convert your LLC or create a new C corp?

Lots of founders start their business using an LLC. It’s cheap, easy to set up, and has personal tax benefits that can be useful in the early days of running a business.

But if you decide to raise equity investment, you’ll immediately hear one thing: investors typically expect you to be a Delaware C corp.

At this stage, it’s not a question of if you make the switch, but how you do it.

Depending on how much work you’ve already done with your LLC, you may be able to set up a brand-new C corp and start fresh. But most founders will need to convert their existing LLC into a Delaware C corp to avoid all sorts of headaches down the line.

This guide breaks down what you need to know before you make the switch, when forming a new C corp might be fine, and why conversion is the cleaner route for most founders gearing up for investment.

Why investors want you to be a C corp rather than an LLC

When you’re fundraising, investors want a structure that offers equity, tax advantages and scales with the company. A C corp gives you all this.

There are several reasons why:

Clean, standard equity structures

C corps make it easy to issue common and preferred stock, which is essential for investors who take equity in return for their capital. LLCs can do equivalents, but it’s much more complex, clunky and VCs and other institutional investors just won’t be interested.

Tax benefits

There are also investor tax breaks designed to encourage early-stage investment, that only attach to the issue of C corp stock (such as QSBS and 1244 Loss Relief)

Built for scaling

As you grow, you’ll most likely need to issue more equity, offer employees stock options, and bring in new investors. C Ccorps are set up to make this simple.

Recognised by investors, accelerators and platforms

Most venture funds, accelerators and crowdfunding platforms work with C corps by default. Some funds are even mandated against investing in anything else. Choosing the structure they’re already set up for reduces friction and delays at every stage of your fundraising.

If you’re already an LLC, what are your options?

If you originally set up your company as an LLC, you can make the switch to C corp. But you need to be careful to choose the right route based on what work you’ve already done with your LLC.

In practice, there are three options:

1. Convert your existing LLC into a C corp

This is usually the cleanest, safest option:

• Your existing LLC becomes a C corp; no need to create new or close old entities
• IP, contracts, customers and history stay in the same entity
• Members’ interests are cancelled in return for stock in the C corp

If your LLC has done anything meaningful work — built a product, created IP, signed customers or brought on co-founders — this is the route to take. It avoids anyone being able to claim the LLC has rights to the IP in your new C corp. It also leaves a clean audit trail and one less thing for your investors to nitpick over.

2. Form a brand-new C corp

This is essentially a ‘fresh start’:

• You incorporate a new Delaware C corp
• You then move things over: IP, contracts, any team or advisors, and eventually shut down the LLC

In practice, this only really works when the LLC has almost no activity, meaning you’ve:

• Formed recently
• Are a single founder
• Have no real IP, customers, contracts or team tied to the LLC
• As soon as the LLC holds anything valuable, you’d do best to convert your existing entity into a C corp rather than start fresh. Otherwise, you could face legal challenges or investors questioning who has the right to the IP you’re building your entire business on.

3. Workarounds in states that don’t allow statutory conversion

Some states don’t support a straightforward LLC to C corp conversion.

If you’re in one of those states, the alternative approach is a statutory merger:

• Create a Delaware C corp
• Merge the LLC into that new C corp
• Continue the business through the Delaware entity

It’s a more complex process than a standard conversion and isn’t currently supported in the SeedLegals workflow. But the principle is the same: you’re bringing everything into one company, not leaving the LLC behind.

When you should convert your LLC rather than forming a new C corp

Founders often wonder whether they can skip converting and simply set up a brand-new Delaware C corp instead. If your LLC has done any real work, you’ll need to convert it, not abandon it.

Here are some of the circumstances where conversion is likely to be the right answer:

Your LLC has created any IP or product

Code, designs, branding, customer data, prototypes, even a detailed business plan, once any of these exist, investors will assume the LLC holds rights to it. A new C corp won’t inherit that work, so conversion keeps IP ownership clean.

You have co-founders or other members

If more than one person is involved, leaving a dormant LLC raises questions about who owns what. Converting keeps everyone’s existing rights intact and avoids disputes later.

You’ve signed customers or contracts

If the LLC has billed customers, taken payments or signed agreements, starting fresh forces you to manually transfer every contract. That’s high-risk and time-consuming. Conversion keeps your trading history in the same entity.

You’ve been operating for more than a short period

If your LLC is older than a few weeks or months (and you’ve done anything beyond registering it) then conversion is almost always the cleaner, safer route.

In short: if your LLC is more than a dormant entity shell, converting early gives you a clean structure that investors and future team members can rely on.

How SeedLegals can help you convert your LLC

Converting your LLC used to cost $$$ in legal fees and involve weeks of delays when you need to take investment quickly.

That’s why we’ve built the world’s first automated LLC to C corp conversion. It takes you from LLC to investment-ready C corp, all for just $1,499.

Here’s what you get:

Step 1: Review your LLC

Before anything is converted, we review your existing LLC to understand how complex the conversion will be.

• We look at your ownership, structure and setup
• We flag anything that could affect the conversion
• If a tax review is needed, we’ll let you know and connect you with our trusted partner

Once that’s done, we move ahead with the conversion.

Step 2: Convert your LLC into a Delaware C corp

We handle the conversion process, end to end.

Getting consent to convert

We generate all the documents needed to approve the conversion, including:

• Plan of conversion
• Member’s consent to convert
• Manager’s consent to convert (if your LLC is manager-managed)

Creating your Delaware C corp

We generate all the core conversion and incorporation documents, including:

• Certificate of Incorporation
• Certificate of Conversion
• State-specific LLC conversion documents where required (for Texas, California and Florida)

State filings taken care of

We file everything with the relevant authorities and cover all filing fees:

• Delaware Certificate of Incorporation and Certificate of Conversion
• LLC conversion filings in Texas, California or Florida where applicable

Once approved, we upload all final documents to the SeedLegals platform to they’re easy for you to find and manage.

Registered agent included

Your Delaware registered agent is set up for you and the cost for the first year is included.

Step 3: Post-conversion setup

After conversion, we generate all the documents your new C corp needs to operate and raise investment.

This includes:

General documents

• Action of sole incorporator
• Initial actions of the board
• Appointment of directors and officers
• Issuance of founder stock
• Bylaws and supporting confirmations
• Stockholder consents

Equity and tax setup

• Stock restriction agreements and vesting terms
• 83(b) election support so founders can be taxed on the price of the stock now not as it vests

Protection and IP

• Confirmatory IP assignment
• Confidential Information and Invention Assignment Agreement (CIIAA)
• Director indemnification agreements

EIN

• We help you obtain your new EIN so you can set up bank accounts and payroll.

Step 4: Start fundraising

Once you’ve converted, you’ll have access to the full set of SeedLegals tools: SAFEs, priced rounds, cap table management and all the core documents you need as you grow.

If you’re ready to make the switch, you can start your LLC to C corp conversion today.

Frequently Asked Questions

Do I need a new EIN?

Yes. When your LLC becomes a C corp, the IRS treats it as a new entity for tax purposes, so you usually need a new EIN. One key exception is where the LLC has already elected to be taxed as a C Corp. No change in tax status will occur here because the forms will be taxed in the same way both before and after conversion. Other exceptions to the need for a new EIN are uncommon.

Do I need a new bank account?

In most cases, yes. A new EIN often triggers your bank to require a new account for the C corp. It’s worth checking with your bank before you start so you can plan for a smooth transition.

Will I need a new registered agent?

Yes. SeedLegals works with its own registered agent as part of the conversion workflow, so your existing one will be replaced when you switch to a Delaware C corp.

Do I need to tell the other members before converting?

Yes. Our process is based on unanimous consent from all LLC members. You’ll need their agreement before you start, otherwise the conversion can’t go ahead on the SeedLegals platform.

Some states allow for majority consent, so if you can’t get 100% approval from your members, we can refer you to our partner law firm to see if they can assist.

What happens to advisory equity or team members during conversion?

You can recreate vesting schedules or issue new grants once you’re a C corp. The conversion itself doesn’t handle advisor or team equity, but you can set everything up afterwards using SeedLegals.

Do I need to file two sets of accounts for the year I convert?

You’ll generally need to close out the LLC’s activity and then begin reporting as a C corp from the date of conversion. The specifics depend on your situation and how your LLC was taxed, so you’ll need to confirm this with your tax adviser.

What documents and materials will I need to share with SeedLegals for the conversion process?

There are several documents and records we’ll need you to provide to complete the conversion:

• Articles of Organization: This can also be known as Certificates of Formation or Certificates of Organization, depending on what state your LLC is incorporated in. It’s the document you’ll have filed in order to incorporate your LLC. Typically, it will include the LLC name, address and registered agent (if one had been appointed).
• Operating Agreement: This is an agreement between the LLC members as to how the LLC will be owned and operated. It’s not a requirement for an LLC to have one of these, but if you do then it’s the primary document that sets out how your LLC is governed. Generally, the Operating Agreement will set out things like member equity split, management structure and voting provisions.
• Capital Accounts: These are the internal bookkeeping record for each member of a multi-member LLC and tracks that member’s economic interest in the company. It increases with contributions and allocated profits, and decreases with distributions and allocated losses. Capital accounts are required for LLCs taxed as partnerships because they determine each member’s share of the LLC’s economic value. You may not have Capital Accounts prepared yet, for example if you incorporated recently or haven’t been taxed yet. If that’s the case, that’s fine, just let us know as part of your onboarding.

Do I need a Tax Review?

Yes. Your accountant will need to let us know about your tax affairs as part of the conversion. It’s worth looking into this sooner rather than later to avoid delays.