There are two kinds of entities – corporations and limited liability companies (LLCs). While there are some differences between the two, one difference that makes conversion much simpler is that there is no tax filing requirement for conversion. If you want to convert a corporation to an LLC, it is very easy to do. You simply need to follow a few steps.
What Is Conversion?
A corporation is a legal entity that exists separate from its owners. This allows the corporation to hold assets, pay taxes, sue and defend lawsuits, borrow money, and issue shares of stock. However, once a corporation reaches certain size limits, it becomes harder to manage and grow. For example, most states require a corporation to maintain a board of directors and shareholders, making it difficult to expand a small business.
An LLC is similar to a corporation, except that it is owned by its members rather than being owned by a third party. As such, an LLC is considered a pass-through entity because profits and losses flow directly to its members. Because of this, LLCs are often used to avoid double taxation.
How Does Conversion Work?
If you decide to convert a corporation to a limited liability company, you will need to complete several steps. First, you will need to determine whether your corporation meets the requirements to become an LLC. Next, you will need to prepare the Articles of Organization and Operating Agreement documents. Finally, you will need to notify your shareholders about the conversion and seek approval. Once you have completed all three steps, you will have successfully converted your corporation to an LLC.
Step One: Determine Whether Your Corporation Can Be Converted into an LLC
Corporations vs. LLCs in Mississippi
There are two types of companies in the United States: corporations and limited liability companies (LLCs). A corporation is a separate legal entity from its owners, meaning that shareholders cannot be held liable for corporate debts. This makes sense because, generally speaking, shareholders are responsible for the actions of the company they invest in. However, some states allow individuals to form a limited liability company without having to file a certificate of formation.
An LLC is similar to a partnership, where partners are personally liable for the obligations of the firm. Unlike a corporation, however, an LLC does not have to file a certificate of incorporation with the state government. Instead, an LLC must comply with specific filing requirements set forth by each state. For example, Delaware requires that an LLC have at least one member who owns 50% or more of the company. Other states require additional documentation such as articles of organization or operating agreements. Some states even require that members hold annual meetings.
The benefits of forming an LLC include lower costs and fewer restrictions compared to a corporation. Many people choose to incorporate simply because it is easier than setting up an LLC. But, if you want to avoid personal liability, consider incorporating in a jurisdiction that allows you to do so without incurring significant fees.
Create your LLC Corporation with just 3 easy steps
How to Transfer Your Mississippi LLC
A partial transfer of ownership allows you to retain control over your business while giving up less equity. If you want to sell your entire LLC to a third party, it’s called flipping or turning around the business. This method usually happens when one partner wants out. Here are some things to consider when transferring your Mississippi LLC.
Moving from sole proprietorship to limited liability company (LLC)
If you are thinking about forming a limited liability company (LLC), here are some things you need to consider:
1. What Type of Entity Should You Form?
You must decide whether to form an S corporation, a partnership, or an LLC. Each of these entities has advantages and disadvantages. An S corporation offers certain tax benefits, but it limits your personal liability. A partnership allows you to limit your personal liability, but it does not offer many tax benefits. An LLC provides both protection against personal liability and tax benefits.
2. How Do I Choose My Name?
When choosing a name for your LLC, make sure you choose one that is unique. If a similar name is already being used, you might want to change your name. Also, check with the state department of revenue to see if another business uses the same name. If so, you could face fines or even criminal charges.
3. Who Can Be Members of Your Company?
An LLC can have members, managers, and owners. Members are people who become part of the LLC. Managers control the operations of the LLC. Owners receive distributions from the profits of the LLC.
File Articles of Incorporation with Your State Government Office
Forming a limited liability company (LLC) begins with filing Articles of Organization with your state government office, usually the Secretary of State. This document establishes the LLC’s name, purpose, number of members, and address. An LLC must have an operating agreement, which governs how it operates. If you are incorporating a foreign entity, check out our article about registering your LLC abroad.
Create an LLC Operating Agreement
An LLC operating agreement is required by law in most states. This document establishes how you want your limited liability company to operate.
In some cases, using an operating agreement template may be helpful. There are several free templates available online.
Register with the IRS to file your taxes
If you are a U.S. citizen or resident alien, you must register with the Internal Revenue Service (IRS) by filing Form 1040-ES and paying any tax due. You also may need to pay an estimated income tax for 2018 if you expect to owe more than $1,000 in federal income tax. If you do not have enough withholding from your paycheck to cover all of your taxes, you can use Form W-4EZ to request additional withholding.
You should file your return as soon as possible after April 15th, but no later than June 1st. The IRS will accept returns filed before this deadline, but they cannot be processed until late July.
Apply for a New Bank Account
Many people think that starting a small business requires a huge investment of money. This couldn’t be further from the truth. It takes less than $1,500 to open a bank account for a sole proprietorship. But there are some things to consider before you make your final decision. Here are five tips to help you decide whether to start a business with a bank account or go with a credit union.
#1 – Know What You Need Before Opening An Account
Before you apply for a bank account, you’ll want to take stock of what you need. Do you need one for payroll? Will you use online banking? Are you planning to do business with multiple banks? Talk to your banker if you’re unsure about how much space you need. They’ll be able to tell you exactly what options you have and what you need to do to prepare for opening an account.
#2 – Consider Your Business Needs
The next thing you’ll want to do is figure out what type of bank account you need. A checking account is probably the most common choice for small businesses because it offers basic functions like bill paying and transfers. However, depending on your needs, you might also want to consider a savings account or even a CD. For example, if you plan to invest in equipment, you might want to consider a CD. And if you plan to expand into different areas of business, you might want to choose a business checking account that includes features such as free check writing.
#3 – Make Sure You Can Pay Online
If you don’t already have an e-banking system, you’ll want to find one that allows you to pay bills and manage your finances online. Many banks offer online access, but you’ll want to double-check that you can actually pay your bills online. Some banks require that you call in to make payments, while others allow you to pay online without calling. If you aren’t sure, ask your banker/
Apply for Business Licenses and Permits
Businesses are required to apply for multiple types of licenses and permits. Some businesses are exempt from licensing requirements altogether, while others must comply with specific rules. Ask your local government agency if you do not know whether you need a permit or license. You can use our free online tool to determine what type of license or permit you need.
Frequently Asked Questions
What are some ways I can pay for LLC filings?
LLC filing fees are $500.00 per year and must be paid annually in advance. The fee is non-refundable. If you do not have the funds to cover this amount, please contact us at (800) 544-9778 or [email protected]
How to transfer your Mississippi LLC to a new state
It can be a daunting task if you’re thinking about moving your business from one state to another. You have to decide where to move and then figure out how to transfer the ownership of your company to that new location. If you don’t do this correctly, you could lose all your hard earned money and time.
What Is a Mississippi Sole Proprietor?
A sole proprietorship is the simplest form of business ownership. It’s also one of the most common forms of business ownership in the United States, with more than half of all businesses being sole proprietorships. A sole proprietorship is owned by an individual who has no other partners or shareholders. The owner can be anyone from a single person to a corporation.
James Rourke is a business and legal writer. He has written extensively on subjects such as contract law, company law, and intellectual property. His work has been featured in publications such as The Times, The Guardian, and Forbes. When he’s not writing, James enjoys spending time with his family and playing golf.