{"id":414813,"date":"2025-02-19T16:00:50","date_gmt":"2025-02-19T16:00:50","guid":{"rendered":"https:\/\/seedlegals.com\/?p=414813"},"modified":"2025-02-19T16:00:50","modified_gmt":"2025-02-19T17:00:50","slug":"how-to-convert-your-llc-into-a-c-corp","status":"publish","type":"post","link":"https:\/\/seedlegals.com\/us\/resources\/how-to-convert-your-llc-into-a-c-corp\/","title":{"rendered":"Easily convert your LLC into a Delaware C corp on SeedLegals"},"content":{"rendered":"","protected":false},"excerpt":{"rendered":"

Often, founders start their business as a Limited Liability Company (LLC) because it\u2019s cheap and quick to set up.
\nBut as your business grows \u2013 particularly if you start looking for venture capital investment \u2013 switching to a C corporation (C corp) could be the right move.<\/p>\n","protected":false},"author":169,"featured_media":414814,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[141],"tags":[],"event_tags":[],"class_list":["post-414813","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized-us"],"acf":{"blog_layout":"v2","v2":{"hero":{"image_background_color":"#E7F1FF","image_fit":"img--cover"},"adverts":[{"type":"selector","selected_advert":{"ID":412063,"post_author":"77","post_date":"2024-11-11 09:44:14","post_date_gmt":"2024-11-11 09:44:14","post_content":"","post_title":"US - Start free","post_excerpt":"","post_status":"publish","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"us-start-free","to_ping":"","pinged":"","post_modified":"2024-11-13 16:18:26","post_modified_gmt":"2024-11-13 16:18:26","post_content_filtered":"","post_parent":0,"guid":"https:\/\/seedlegals.com\/?post_type=blog_advert&p=412063","menu_order":0,"post_type":"blog_advert","post_mime_type":"","comment_count":"0","filter":"raw"},"custom_advert":{"advert_tracking_id":"","layout":"default","image":{"image":false,"link":""},"text":{"heading":"","content":"","button":null,"background_color":"#EEF4FF","text_color":"#000646"},"form":{"form":{"type":"none","hubspot_form":{"layout":"newsletter","hide_founderinvestor_toggle":false,"default_community":"founder","custom_form_id":"","gdpr_disclaimer":"By subscribing, you agree to receive information from SeedLegals. You can unsubscribe anytime. View our privacy policy<\/a>"},"custom":{"embed":""},"gtm_form_type":false,"gtm_form_location":false}},"cta_and_testimonials":{"heading":"","button":null,"bullet_points":false,"testimonials":false}}}],"related_sidebar_posts":false},"show_author_card":false,"revision_date":"","hero_image":414814,"has_custom_post_authors":true,"custom_post_authors":{"authors":[{"author":{"ID":172,"user_firstname":"Drew","user_lastname":"Macklin","nickname":"drewmacklin","user_nicename":"drewmacklin","display_name":"Drew Macklin","user_email":"drewmacklin@seedlegals.com","user_url":"","user_registered":"2024-11-08 15:39:57","user_description":"","user_avatar":""},"role":"Legal review"},{"author":{"ID":169,"user_firstname":"Idin","user_lastname":"Sabahipour","nickname":"Idin Sabahipour","user_nicename":"idin-sabahipour","display_name":"Idin Sabahipour","user_email":"idin@seedlegals.com","user_url":"","user_registered":"2024-08-29 09:55:07","user_description":"","user_avatar":""},"role":"Writer"}]},"is_expert_reviewed":true,"post_content_width":"default","post_content":[{"acf_fc_layout":"text","text":"

Often, founders start their business as a Limited Liability Company (LLC) because it\u2019s cheap and quick to set up. In some cases, it can also offer tax benefits when the company is operating at a loss.<\/p>\n

But as your business grows \u2013 particularly if you start looking for venture capital investment \u2013 switching to a C corporation (C corp) could be the right move.<\/p>\n

This guide will cover the differences between the two structures, why you might convert and how to actually do it.<\/p>\n"},{"acf_fc_layout":"text","text":"

What are the key differences between an LLC and a C corp?<\/strong><\/h2>\n

Both LLCs and C corps offer liability protection (meaning business owners generally aren\u2019t personally liable for the company\u2019s obligations, beyond what they\u2019ve personally invested).<\/p>\n

But otherwise the two are different in many ways \u2013 we\u2019ve shown them in this table:<\/p>\n\n\n\n\n\n\n\n\n\n\n
<\/td>\nLLC<\/strong><\/td>\nC corp<\/strong><\/td>\n<\/tr>\n
Ownership<\/strong><\/td>\nMembers<\/td>\nStockholders<\/td>\n<\/tr>\n
Structure<\/strong><\/td>\nMore flexible (can be managed by members)<\/td>\nMore formal (requires a board of directors)<\/td>\n<\/tr>\n
Governance<\/strong><\/td>\nMinimal requirements<\/td>\nRequires bylaws, annual meetings, etc.<\/td>\n<\/tr>\n
Taxation<\/strong><\/td>\nPass-through taxation (profits are taxed once at the owner level)<\/td>\nDouble taxation (profits are taxed at both the business and owner levels)<\/td>\n<\/tr>\n
Equity<\/strong><\/td>\nCannot issue stock<\/td>\nCan issue multiple classes of stock<\/td>\n<\/tr>\n
Fundraising<\/strong><\/td>\nNot attractive to VCs<\/td>\nIdeal for raising VC and public investment<\/td>\n<\/tr>\n
Liability protection<\/strong><\/td>\nBusiness owners aren\u2019t personally liable<\/td>\nBusiness owners aren\u2019t personally liable<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n"},{"acf_fc_layout":"text","text":"

Why convert your LLC to a C corp?<\/strong><\/h2>\n

To raise venture capital<\/strong><\/h3>\n

Venture capitalists typically prefer C corps over LLCs because of the way they\u2019re taxed. An investor in an LLC could be taxed even if they don\u2019t receive any distributions from the company \u2013 and VCs don\u2019t like that! With C corps, investors are only taxed if they sell their stock or receive distributions from the company (like a dividend) \u2013 that\u2019s why VCs prefer them.<\/p>\n

Also, investors \u2013 especially VCs \u2013 will generally only want to invest in Delaware C corps. That\u2019s because the laws in Delaware are very business-friendly and investors are most familiar with them.<\/p>\n

So, if you started out with a non-Delaware LLC, say, an Iowa LLC, converting it into an Iowa C corp might not help improve your investability. But changing to a Delaware C corp would.<\/p>\n

We\u2019ll cover how to do that in this article.<\/p>\n

To offer employee equity<\/strong><\/h3>\n

Unlike LLCs, C corps let you issue stock, which you can use to attract and incentivize employees.<\/p>\n

It\u2019s worth noting that with LLCs, you can offer employees \u2018profit interest units\u2019 (which give them the right to receive a percentage of the LLCs future profits) and \u2018phantom equity\u2019 (which give them the contractual right to certain payments as if they held real equity). But there are some restrictive tax rules related to compensation for owners of an LLC, so it\u2019s more typical to incentivize employees by offering them stock (or stock options) in the company \u2013 which C corps let you do.<\/p>\n

To scale globally<\/strong><\/h3>\n

C corps are generally better for international business operations. Most countries outside the US are more familiar with C corps than with LLCs \u2013 and, in fact, many countries treat LLCs as if they were C corps for tax purposes anyways. So, for example, it might be easier to get better tax treatment abroad as a C corp.<\/p>\n"},{"acf_fc_layout":"text","text":"

Are there downsides to converting from an LLC to a C corp?<\/strong><\/h2>\n

While C corps do have some benefits compared to LLCs, there are some trade-offs too:<\/p>\n