How to convert an LLC to a C-Corp: the F-reorganization route

Most foreign founders incorporate an LLC first because it is cheaper and simpler, then discover that VCs require a C-Corp. Converting LLC to C-Corp is routine but requires sequencing across IRS, Delaware Secretary of State and any registered foreign-state authorities. The tax-clean route is an F-reorganization under Section 368(a)(1)(F) of the Internal Revenue Code, which treats the conversion as a mere change in identity, form or place of organization, preserving the LLC's tax history and EIN.

Three methods exist. (a) Statutory conversion under Delaware Section 265: the LLC files a Certificate of Conversion and Certificate of Incorporation with the Delaware Secretary of State, converting in a single step. Tax-clean if structured as F-reorg. (b) Merger: form a new Delaware C-Corp, then merge the LLC into it. More paperwork, useful when the LLC is not in Delaware. (c) Asset transfer: the LLC contributes assets to a new C-Corp in exchange for stock, then dissolves. Most expensive in tax terms. Statutory conversion is the default for Delaware LLCs.

Prepare and file with the Delaware Division of Corporations: Certificate of Conversion from a Limited Liability Company to a Corporation (filing fee USD 200), and Certificate of Incorporation (filing fee USD 89 minimum, scaling with authorised shares). Specify authorised shares (commonly 10 million for startups), par value (typically USD 0.0001), and the registered agent. Effective date can be backdated to a prior date or specified as a future date within 90 days, useful for aligning with quarter-end.

Critical: an LLC that converted to a C-Corp under F-reorg keeps its EIN. Do not apply for a new EIN. The IRS treats this as a continuation under Section 368(a)(1)(F). File a final Form 1065 (if the LLC was a partnership) or final Schedule C/Form 1040 (if single-member disregarded) for the period ending on the conversion date, marked 'Final Return'. From the conversion date forward, file Form 1120 (corporate income tax return) for the C-Corp. Notify the IRS of the entity reclassification - it flows automatically from the state conversion when handled correctly.

Issue C-Corp common stock to former LLC members in proportion to their LLC units (subject to any agreed reorganisation). Document with a stock purchase or contribution agreement, board resolutions and stock certificates. If members took 83(b) elections on restricted units, those carry over conceptually but document the C-Corp equivalents. Update bank accounts, payroll providers, customers and vendors with the new corporate name. Re-qualify in any foreign states where the LLC was registered. Update any state sales tax or wage withholding registrations. Update intellectual-property assignments to reflect the corporate name.

Does converting LLC to C-Corp create a taxable event?
If structured as an F-reorganization under Section 368(a)(1)(F), no taxable event. The conversion is treated as a mere change of form. Asset-transfer conversions or improperly structured conversions can trigger gain recognition on appreciated assets.

Do I get a new EIN after converting?
No, provided the conversion qualifies as an F-reorg. The corporation keeps the LLC's EIN. The IRS will recognise this automatically. Applying for a new EIN is a common mistake that creates reconciliation headaches.

How long does the conversion take?
Delaware processes standard filings in 7-10 business days; expedited filings in 24 hours for an additional fee (USD 100-1,000 depending on speed). Federal IRS reconciliation is automatic. Total clean conversion typically two to three weeks including document drafting.

What about 83(b) elections on the original LLC profits interests?
Profits interests in an LLC do not directly translate to C-Corp restricted stock. Founders should issue new restricted stock at the conversion and file new 83(b) elections within 30 days of issuance to lock in the low-FMV basis.

Do I need a new operating agreement?
The LLC operating agreement terminates. The C-Corp is governed by Bylaws and a Shareholders' Agreement. Draft new C-Corp Bylaws, organize the first Board Meeting, appoint officers, and ratify the post-conversion stock issuance.

Will VCs invest immediately after conversion?
Yes, provided the conversion paperwork is clean. VCs will diligence the conversion: F-reorg documentation, EIN continuity, restricted-stock 83(b) elections, board resolutions, and that all foreign state qualifications are updated.