So you formed your limited partnership or close corporation and your business has flourished. You have employees, an established customer base, perhaps even room to franchise out. But your current business entity is limited and inefficient for business expansion. Perhaps you would benefit from a different tax structure or more legal protection. Or maybe you have found that a partnership would be more beneficial given the realities of your business. How do you go about changing your business entity from one type to another? Do you need to form an entirely new company? Read on to learn about changing your business entity type after formation, and speak with a seasoned Houston business law attorney if you need help with a Texas business law matter.
Historically, when a business owner wanted to convert to a new type of entity, they would simply close the existing entity and open a new one. The process for doing so is now much more complicated. There are legal, administrative, and tax implications, as well as complex issues involved with distributing the assets legally and soundly. This is no longer the preferred method.
A slightly better approach would be to start a new entity (either in the same state or in the new, desired state) and merge the existing business into the new entity. Merging transfers all assets by operation of law into the new entity. It is marginally less complicated than closing a business and transferring all assets to a new business, but it is still more complicated than necessary. In Texas, you can instead convert your existing entity into a new entity type, otherwise preserving the same business’s existence.
Converting a business into a new entity type is a much simpler way to deal with changing a business’s type. The process became available over the last couple of decades due to changes in state corporate law. Statutory conversion can involve changing from one entity type to another or even changing a corporation’s jurisdiction from one state to another.
Conversions will generally involve the following steps:
The Plan of Conversion is a relatively simple document that states the base elements of the conversion: name of the original entity; name of the new entity; a statement that the entity will continue and will now become a new entity type; and the Certificate of Formation. The Texas Secretary of State provides a sample Plan of Conversion.
The process is slightly different depending on what type of entity you are coming from, and which you are converting to. Different forms will be required. Texas has specific forms for converting LLCs to corporations, corporations to LPs, corporations to LLCs, etc. A seasoned Texas business attorney can walk you through the process and ensure you generate and file all appropriate forms.
If you need legal assistance with a Texas business law matter, contact the seasoned and experienced Texas business lawyer Leigh Meineke at the Houston offices of Leigh B. Meineke Law Firm by calling 832-706-0244.
By Leigh B. Meineke Law Firm | Posted on October 22, 2020Leigh B. Meineke is the founder and principal attorney at the Leigh B. Meineke Law Firm, where she has been advising and representing individuals and businesses in Houston and Harris County since 1995.
Leigh has been practicing law with area law firms since 1980 and excels in the fields of business law, estate planning and probate, and real estate and construction law.
In addition to her legal practice, Leigh spent 13 years as an adjunct professor at both the University of Houston and Houston Baptist University, teaching classes on business law and human resources management.
If you or your business needs comprehensive legal counsel, please contact Leigh B. Meineke Law Firm for a complimentary consultation regarding your specific concern.
14053 Memorial Drive #444The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. Leigh B. Meineke Law Firm invites you to contact them and welcomes your calls, letters and email. Contacting Leigh B. Meineke Law Firm does not create an attorney-client relationship. Please do not send any confidential information to Leigh B. Meineke Law Firm until such time as an attorney-client relationship has been established.
Office Hours: 9-5 (M-F)© 2018 - 2024 Leigh B. Meineke Law Firm. All rights reserved.
Custom WebShop™ attorney website design by NextClient.com.
