{"id":7808,"date":"2020-09-17T19:43:38","date_gmt":"2020-09-17T19:43:38","guid":{"rendered":"http:\/\/www-staging.carta.com\/sg\/?p=7808"},"modified":"2021-03-05T06:54:29","modified_gmt":"2021-03-05T06:54:29","slug":"convert-llc-c-corp","status":"publish","type":"post","link":"https:\/\/www-staging.carta.com\/sg\/blog\/convert-llc-c-corp\/","title":{"rendered":"How to convert your company from an LLC to a C-corp"},"content":{"rendered":"

Starting your company as an LLC<\/span><\/a> can have significant benefits\u2014including a flexible structure and easy setup\u2014but you may need to restructure as a corporation later on.\u00a0<\/span><\/p>\n

Converting from an LLC to a <\/span>C-corp<\/span><\/a> can make it easier to <\/span>fundraise<\/span><\/a>, among other things, but the process can be tedious for some companies.\u00a0<\/span><\/p>\n

If you\u2019re considering a C-corp vs.<\/span>\u00a0LLC<\/a><\/span>, here\u2019s what you need to know:<\/span><\/p>\n

C-corps vs. LLCs<\/span><\/h2>\n

Both LLCs and C-corps offer business owners personal liability protection from business debts and lawsuits, but the two business types have different ownership structures and tax consequences.\u00a0<\/span><\/p>\n

\n \n \n \n \n \n <\/colgroup>\n \n\n \n\n \n \n \n
.<\/span><\/th>LLC (Limited Liability Company<\/a>)<\/strong><\/th>C-corp (C Corporation<\/a>)<\/strong><\/th><\/tr>\n<\/thead>\n
Structure<\/strong><\/td>\u2022 LLCs can have sole owners or multiple owners (called members).

\u2022 The members create an operating agreement that details the management structure and each member\u2019s individual share of ownership. <\/span><\/td>		\u2022 C-corps have a set ownership structure, part of which involves creating a board of directors and agreeing on corporate bylaws.<\/td> <\/tr>\n
Equity<\/strong><\/td>\u2022 Members hold equity interests, meaning they receive a percentage of profits based on how much money they invested in the company.

\u2022 LLCs can\u2019t issue shares to employees, but they can issue what\u2019s called profits interests units. LLCs can also have an unlimited number of members who receive profits.<\/td>		\u2022 Owners<\/a> (called shareholders) are issued shares of stock in the company.

\u2022 Shareholders may be able to sell their shares.<\/td> <\/tr>\n
Taxes<\/strong><\/td>\u2022 Company profits and losses are passed through to the individual members.

\u2022Members pay taxes on their share of company profits on their personal tax returns.

\u2022However, members can also take a C-corp or S-corp tax election<\/a>.<\/td>		\u2022The corporation pays corporate income taxes on its profits and losses.

\u2022The shareholders may pay taxes<\/a> when they sell (and sometimes buy) their shares.<\/td> <\/tr>\n <\/tbody>\n <\/table>\n