Businesses are required to file a conversion report under certain circumstances. This includes moving from one state to another. If you do not file a conversion report, the IRS could impose penalties. You can find out what those penalties are here.
If you move from one state to another, you must file a conversion report. However, if you move from one county to another within the same state, you do not need to file a report. To determine whether you need to file a conversion form, check the following criteria:
1. Your headquarters moved from one state to another during the tax year.
2. Your headquarters moved from a city in one state to a city in another state.
3. Your headquarters moved from an incorporated area in one state to an unincorporated area in another state.
4. Your headquarters moved from the federal district where it was located to the federal district where it now resides.
5. Your headquarters moved from another state to Wisconsin.
Wisconsin Conversion From a Corporation
In Wisconsin, there are two ways to convert an LLC into a corporation. One way is to assign ownership. This occurs when one member transfers his or her interest to another person. Another method is called a “full sale.” When a full sale takes place, all members sell their shares to another party. The second option requires approval from the state Division of Corporations. Ownership of an LLC can be transferred without dissolving the company. However, if the LLC is sold, the seller must obtain permission from the state department.
An assignee cannot sell the LLC until the original owners agree. If the original owners do not want to sell, there is no way to force them to sell.
A partial sale does not require dissolution if both parties agree to accept the owner’s portion of the profits and losses as well as the liabilities.
If you wish to dissolve an LLC, you must file a petition with the Department of Revenue. There are three options for the petition: voluntary dissolution, involuntary dissolution, or conversion of the entity into a corporation.
The process involves filing a petition with the Department, paying a $50 fee, and providing proof of payment. Once approved, the LLC is automatically dissolved.
If you have any questions regarding the conversion of a sole proprietor to a limited liability company (LLC), please contact us at 1-800-858-1700 or visit our web site at www.wisinc.com.
Conversion Procedure
A sole proprietorship may convert to an LLC without filing Form Incorporation if the sole proprietor files Form Incorporation under Chapter 180, Corporations, before converting to an LLC. A sole proprietorship may not convert to an LLC until after the corporation converts to an S Corporation. If the sole proprietor does not file Form Incorporation under chapter 180, Corporations, prior to converting to an LLC, then the sole proprietor must comply with the requirements of Wis. Stat. §180.0601(9) (a).
Form Incorporation Requirements
Chapter 180, Corporations requires that a corporation file Form Incorporation prior to commencing business activities. In order to commence business activities, the sole proprietor must complete the following steps:
• File Form Incorporation;
• Pay the $100 fee;
• Obtain a Certificate of Good Standing; and
• Register the corporation’s name with the Secretary of State.
In addition, the sole proprietor should obtain a federal Employer Identification Number (EIN) from the Internal Revenue Service (IRS) prior to commencing business operations. An EIN number is necessary to establish a tax identification number for the corporation.
Wisconsin Conversion From an LLC
In Wisconsin, it is possible to convert from a limited liability company (LLC) to a corporation. This conversion process is called a “conversion,” and it is done under Chapter 180 of the Wisconsin Statutes. There are three ways to do this:
Partial Transfer – If you want to sell part of your interest in the LLC, you can do so without having to form a separate corporation. You can simply sell your shares to someone else. However, the assignee must agree to assume all liabilities of the LLC. The assignee must file Articles Of Organization or Assignments with the Secretary of State within thirty days after the assignment. Any person who receives notice of the filing shall record such notice in the office of the county register of deeds.
Full Transfer – If you want the whole thing, you’ll have to form a separate corporation and sell it to someone else. Once the corporation is formed, you can then dissolve the LLC and take out a new certificate of incorporation. The assignee must pay the LLC’s debts, including taxes and fees due, and he/she must file Articles Of Organization with the Secretary of State. The assignee must notify the Secretary of State of the filing within thirty days after the date of the filing. Any person who receives such notice shall record such notice in his/her office.
Assignment – If you want to give up control of the LLC, you can assign your membership interests to another party. To do this, you must provide written notice to the members of the LLC. The notice must state that you wish to make the assignment. The assignee must sign the notice and return it to you. After receiving the notice, the assignee becomes the sole member of the LLC. The assignment takes effect immediately upon receipt by the assignee.
Wisconsin Conversion From a Nonprofit Corporation
A nonprofit corporation is a type of organization that is legally recognized under state law as having charitable purposes. In addition, nonprofits are generally exempt from paying corporate income tax. However, there are some exceptions. For example, you cannot deduct the cost of goods sold on a nonprofit’s books unless those goods were donated to the nonprofit or purchased with money raised by the nonprofit. You also cannot claim losses on a nonprofit’ s books if the loss is attributable to activities unrelated to the nonprofit’s purpose.
If you want to convert a nonprofit into a taxable entity, you must file a conversion statement with the Department of Revenue in each state where the corporation does business. These statements are called “conversions.” Some conversions require filing a Form W-8BEN with the Department of Revenue, while others do not. If you fail to file conversion in one state, the IRS could impose penalties on you.
The most common reason for converting a nonprofit to a taxable entity is to obtain access to capital markets. Corporations often raise funds via debt offerings and equity offerings. By converting to a taxable entity, the corporation can use the proceeds to pay off debts or make investments.
Wisconsin Conversion From a Limited Partnership
Conversion from a limited partnership to a corporation requires special procedures. You must file articles of conversion with the Secretary of State within 30 days of the date you complete the conversion.
The process begins with filing Articles of Conversion with the Secretary of State. These are the same documents filed when forming a limited liability company. The Secretary of State will send notice to each member of the limited partnership stating that it has been converted into a corporation.
You must notify each partner of the change in status. This notification must occur no later than 10 days prior to the effective date of the conversion. Failure to provide timely notice could cause the conversion to fail.
Do I need an attorney to help me file the Articles of Incorporation?
The Internal Revenue Service (IRS) does not require individuals to hire an attorney to form a corporation or LLC. However, there are certain situations where it might make sense to retain counsel. For example, if you are filing under Section 501(c)(3), you must consult with an attorney about how to organize the organization properly. If you are seeking tax-exempt status, you should know what types of organizations are eligible. And if you plan to incorporate a business, you should consider hiring an attorney to assist you in preparing the documents.
If you do decide to seek assistance from an attorney, it is important to understand that the IRS does not recommend one particular type of entity over another. In fact, the agency encourages taxpayers to choose the most appropriate structure based on their specific needs.
As part of your research, you should review the following information:
• What type of entity is best suited for your business?
• Which state do you wish to register your entity in?
• Do you want to limit liability for personal assets?
• How many shareholders will be involved?
Do I need to register my business in Wisconsin?
Businesses operating as Corporations (C), Not-for-Proft Corporations (NPC), Cooperatives (COOP), Limited Partnerships, Limited Lien Companies (LLC), Limited Liability Companies (LIMO), Limited Liability Partnership (LLP), Common Law Trusts (CT), Foreign (out-of state) Entities of the same type licensed to transact business in WI (FTE), Veterans (VET) and certain types of Religious Organizations (R) are required to register with the Wisconsin Department of Financial Institures (DFI). Registration allows DFI to provide information about your organization to consumers and other businesses.
The registration process requires the filing of several documents including Articles of Organization, Certificate of Existence, and Certificate of Good Standing. These documents are filed with the appropriate County Register of Deed. You will receive a letter requesting the filing of certain documents upon completion of the application process. If you do not complete the entire application process within 30 days, you will lose your ability to file the documents with the County Register of Deeds and your registration will expire.
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.
