WHAT IS CONVERSION
Each state recognizes a few different legal types of businesses.
These include Corporations, Limited Liability Companies (LLC), General Partnerships (GP), Limited Partnerships (LP) and Limited Liability Partnerships (LLP). Some states may recognize other business types but these are the most common.
Each type of business has its own set of state laws for that specific business type.
The type of business chosen when a business is first started depends on many factors,
These include the nature of the specific business activity in which the new company will partake and, probably most importantly, tax considerations of the owners - shareholders for Corporations, Members for LLCs and Partners for GPs, LPs and LLPs.
After a business has been in operation for a while, the people responsible for making operational business decisions may determine that it is more advantageous for the company to be subject to a different set of business laws.
For example, the Board of Directors of a Corporation may determine that it would be more advantageous to be subject to the laws and taxes of a LLC.
Or the Partners in a LP may find advantages in changing their business structure to a LLC or Corporation.
Conversion refers to the changing of a company from one business structure to another.
Some states also allow a legal procedure called a Merger.
When two companies are merged into one, one of the companies has to be legally closed.
This usually involves legally dissolving one of the businesses with the Secretary of State.
Conversion is usually an easier and cheaper process than Merging companies because you do not have to form a new company before the Conversion can be completed.
All states have restrictions on business types and exactly how they can be Merged or Converted.
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