LLC to C-Corp, via F-reorganization.

Reasons to start as an LLC:

• Lower formation cost and simpler setup (Stripe Atlas offers both, but LLC is cheaper and faster).
• Pass-through tax at the owner level — no C-Corp double taxation. Attractive if the entity is cash-flow positive early.
• Minimal annual compliance for a dormant or small-revenue single-member LLC.

Reasons to convert at scale:

• US VCs invest only (or almost only) in Delaware C-Corps. Preferred stock terms, SAFEs, convertible notes, voting agreements all assume C-Corp structure.
• Stock options (ISOs, NSOs) are a C-Corp instrument — LLC profits-interests do not translate cleanly to standard employee equity.
• 83(b) elections on founder equity need the founders holding restricted stock in a C-Corp (not LLC member units).
• QSBS (Section 1202) applies to C-Corp stock only. 5-year holding period starts from the conversion date on the shares received in the F-reorg (the LLC holding period does not carry over for QSBS).

IRC Section 368(a)(1)(F) defines an F-reorganization as a 'mere change in identity, form, or place of organization'. The LLC-to-C-Corp conversion where the ownership and operations continue unchanged qualifies as an F-reorg.

Structure:

1. Form a new Delaware C-Corp with the same ownership as the existing LLC.
2. Each LLC member contributes their LLC interest to the new C-Corp in exchange for C-Corp stock.
3. The LLC becomes a wholly-owned subsidiary of the C-Corp.
4. Then the LLC is dissolved into the C-Corp (merger or liquidation), making the C-Corp the sole surviving entity.

Alternative Delaware statutory conversion: file a Certificate of Conversion with the Delaware Secretary of State converting the LLC directly to a C-Corp in one step. This is often cleaner, with the same F-reorg tax treatment if executed properly.

For a true F-reorganization:

• No gain or loss recognised at the member or entity level on the conversion.
• C-Corp stock basis = LLC member's basis in the LLC interest, adjusted for any boot received.
• Holding period of the C-Corp stock tacks on to the LLC interest holding period for general capital-gains purposes — but note the QSBS 5-year holding period is separate and starts afresh from the conversion date.
• LLC accumulated losses: suspended losses do not carry forward into the C-Corp (one of the real costs of the conversion).
• Section 752 debt allocations: changes to how LLC debt is allocated can trigger gain for a member whose share of debt decreases below their basis. Model each member's position.

For an Indian founder scenario where the LLC is a disregarded entity (single member) with modest capital contributions and no accumulated losses, the F-reorg is typically fully tax-free with trivial model-out.

1. Delaware Certificate of Incorporation for the new C-Corp (or Certificate of Conversion for the statutory conversion route).
2. Delaware franchise tax filings: the entity transitions from LLC franchise tax (USD 300 flat) to C-Corp franchise tax (minimum USD 400, scales with authorised shares).
3. 83(b) elections for founder restricted stock: file within 30 days of the stock issuance. Mandatory window — miss it and you cannot recover.
4. EIN update: the C-Corp typically obtains a new EIN. The old LLC EIN is retained for closing out the LLC's final tax filings.
5. Form 2553 (optional S-Corp election): generally NOT elected for founders planning US venture funding — non-US-citizen owners disqualify S-Corp status, and S-Corp cannot have preferred stock. Skip for VC-track companies.
6. Bank account: open new C-Corp account; close LLC account after moving funds and final payroll.
7. Contracts: assign LLC contracts to the C-Corp (or novate with each counterparty). Customer contracts, SaaS subscriptions, SaaS tools, employment agreements, independent-contractor agreements.
8. State registrations: foreign qualification in any states where the LLC was registered; renew for the C-Corp.
9. Form 5472 continuity: if the LLC was foreign-owned-disregarded, the final partial-year 5472 is filed. The C-Corp's ongoing 5472 obligation starts from the conversion date.