Legal Question in Business Law in California

Re: incorporate an LLC

You should dissolve the LLC and create a new corporation.

Re: incorporate an LLC

You would dissolve the LLC and incorporate. BUT:

1. Why do you want to issue stock now? Are there other ways to accomplish the same things?

2. What are the tax implications? Don't just go ahead without checking with a tax professional who is familiar with your particular situation. You probably don't want this to be a taxable event.

Re: incorporate an LLC

This is a supplemental answer. I think your question got posted twice.

After careful review of the statutes, case law and treatises on this subject, I think my previous answer and many of the other answers you have received may be technically INCORRECT.

It's possible that an LLC CANNOT be converted directly into a California corporation. The reason given by one well-regarded treatise is that our Corporations Code makes no explicit provision for conversion to or from corporate status. (CEB's 'Forming and Operating California LLCs' at page 416 says "The California General Corporations Law (Corp Code 100 - 2319) is silent on conversions. As a result, a corporation cannot be a participant in a conversion.")

If this assertion is correct, if you wanted to change your business format from LLC to Calif. corporation, you would have to form a new corporation first, then merge the existing LLC into it.

This is relatively straightforward, at least conceptually, but has important ramifications and differs from conversion in material ways.

For example, in a conversion, there are no immediate tax consequences and all contracts, etc. remain in effect. A merger, on the other hand, might result in tax consequences such as a change in basis, recognition of gain, or re-assessment of real property under Prop. 13.

I strongly urge you to retain a business lawyer or lawyers with experience in corporate, tax and securities matters before taking any steps to reorganize or recapitalize your business.