How to Convert Missouri Corporation to LLC | The Ultimate Guide

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Convert Missouri Corporation to LLC

When it comes to business structures, corporations and limited liability companies (LLCs) are two of the most popular options in Missouri. Each business structure has advantages and disadvantages, so business owners must choose the best fit for their needs. There may come a time when a corporation realizes that converting to an LLC would be more beneficial. This comprehensive guide will walk you through Converting Missouri Corporation to an LLC, discussing the reasons for conversion, the steps involved, and any potential challenges you may face.

Webinarcare Editorial Team will help you easily understand the conversion process, so you must be guided by all the factors gathered in this article.

How to Convert Missouri Corporation to an LLC

Understanding Corporation and LLC in Missouri

Understanding the differences between corporations and LLCs in Missouri is essential for aspiring business owners and entrepreneurs. Both business structures offer distinct advantages and disadvantages, and comprehending their characteristics is crucial in making informed decisions.

Corporation

A corporation is a legal entity separate from its owners, known as shareholders or stockholders. It provides limited liability protection to its owners, meaning shareholders’ personal assets are typically shielded from company debts or liabilities. Corporations in Missouri have the advantage of being able to issue stock to raise capital, making them an attractive choice for businesses seeking significant investment opportunities. However, corporations also come with additional formalities, such as regular shareholder meetings and extensive record-keeping requirements.

Limited Liability Company (LLC)

A limited liability company (LLC) is a flexible business structure that combines the advantages of both corporations and partnerships. LLCs offer limited liability protection to their owners, called members, shielding their personal assets from business debts or lawsuits. Unlike corporations, LLCs do not require as many formalities as regular meetings or extensive record-keeping. This aspect makes LLCs more suitable for small businesses or entrepreneurs who prefer a less burdensome administrative and compliance structure.

Understanding the distinctions between corporations and LLCs is crucial to determine which structure aligns best with your business goals, resources, and needs in Missouri. By evaluating liability protection, taxation, ownership structure, and operational flexibility, entrepreneurs can make confident decisions when establishing their business entity in Missouri.

It is suggested that you speak with a legal professional before you begin converting your Missouri corporation to an LLC. They’ll understand what’s best for you and your company. To safeguard your personal assets from business debts, you can always start an LLC in Missouri.

– WEBINARCARE EDITORIAL TEAM

How to Convert Missouri Corporation to an LLC

Converting a corporation to an LLC in Missouri involves several steps, which may vary depending on Missouri laws and regulations. Here is an outline of the steps required to convert Missouri corporation to an LLC:

Step 1: Research and Understand the Conversion Process

Before embarking on the conversion process, it’s crucial to research and understands the specific requirements and steps involved in converting a corporation to an LLC in Missouri. Familiarizing yourself with the relevant state laws, regulations, and necessary forms or filings will help ensure a smooth transition. 

The Missouri Secretary of State will often have valuable information about the conversion process, including required forms, fees, and filing procedures. Look for sections related to business entity conversions and corporation dissolution. In converting to an LLC, hiring an LLC Service in Missouri is best since it provides guidance and assistance.

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Step 2: Obtain Shareholder Approval

The second step in converting Missouri corporation to an LLC is obtaining approval from the corporation’s shareholders. This typically involves holding a shareholder meeting and voting on a resolution to approve the conversion. Be sure to review the corporation’s bylaws to ensure that the proper procedures are followed.

Step 3: Prepare and File a Plan of Conversion

Missouri requires that a Plan of Conversion be prepared and filed with the Missouri Secretary of State. This document outlines the terms and conditions of the conversion, including the name and structure of the new LLC, the conversion’s effective date, and any other relevant information. 

In terms of naming your Missouri LLC, you must adhere to the following when choosing your LLC’s name:

  • The name must include “Limited Liability Company,” “LLC,” or “L.L.C.“
  • The name cannot include words or phrases that imply the company is engaged in activities it is not authorized to conduct.
  • The name must be distinct from other registered businesses in Missouri.

In Missouri, if you do not wish to file your LLC right away but want to hold the name that you have decided on, then you can reserve your LLC name for 60 days. You must file a name reservation application with the Missouri Secretary of State to keep the name. 

You can register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for Missouri DBA (doing business as). In this manner, you can choose any name you desire for your business. A DBA allows a company to operate under the name of the person or entity who owns it. If you have decided to file for a DBA, you can file it in three methods, online, by mail, and in person filing.

However, before filing a DBA, you should know that you need to renew your DBA every five years, which costs $7.

Be sure to review Missouri’s specific requirements for a Plan of Conversion, Or you can hire the Best Missouri Registered Agent Services for easier processing. 

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Step 4: File Articles of Organization for the New Missouri LLC

Along with the Plan of Conversion, you must file the Articles of Organization in Missouri for your new LLC. This document establishes the new LLC that includes information such as the LLC’s name, Registered Agent, and management structure. 

For your LLC name, you must check the availability of your desired LLC name by searching the Missouri Secretary of State Business Services‘s website.

Regarding your Registered Agent, he must receive and forward legal and tax documents on behalf of your LLC, such as service of process, state tax notification, and filing Annual Report. Your Registered Agent must have a physical address in Missouri and be available during regular business hours. The cost of Registered Agent in Missouri ranges from $50 – $150.

With all of the information included in the Articles of Organization, you must pay the filing fee of $105, which you can pay with the Missouri Secretary of State.

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Step 5: Prepare the Operating Agreement

While not always required by state law, it’s a good idea to draft an operating agreement for the new Missouri LLC. This document outlines the LLC members’ roles, responsibilities, ownership percentages, and other important operational details.

The operating agreement should include the following:

  • The roles and responsibilities of members and managers
  • The process for admitting or removing members
  • The allocation of profits and losses among members
  • The procedure for making major decisions
  • The process for dissolving the LLC

Step 6: Notify Creditors and Other Interested Parties

Inform creditors, vendors, and other interested parties of the Missouri corporation’s conversion to an LLC. This can help ensure a smooth transition and maintain good relationships with those involved in your business.

Step 7: Update Tax Information

After converting to an LLC, you must update your tax information with the Internal Revenue Service (IRS) and the Missouri Department of Revenue. This includes obtaining a new Employer Identification Number (EIN) for the LLC and updating any tax accounts or registrations.

To obtain an EIN for your Missouri LLC, you can apply online on the IRS website, by mail, or by fax. The online application process is the fastest and most convenient method, as you will receive your EIN immediately upon completing the application. There is no fee to obtain an EIN.

The application of an EIN in Missouri can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

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As an LLC in Missouri, your business may be subject to various state taxes and licenses, depending on the nature of your operations. Common taxes and licenses include:

  • Sales Tax: If your LLC sells taxable goods or services, register for Missouri sales tax permit and collect sales tax from your customers.
  • Employer Taxes: If your LLC has employees, you may be required to register for Missouri unemployment insurance and workers’ compensation coverage.

To ensure you comply with all applicable Missouri tax and licensing requirements, you can check out the Missouri Department of Revenue and Missouri Small Business Taxes for more information.

Step 8: Update Licenses and Permits

Depending on the nature of your Missouri business, you may need to update or obtain new licenses and permits for your LLC. Check with the appropriate local, state, and federal agencies to ensure your LLC complies with all necessary regulations.

Reasons for Converting Missouri Corporation to an LLC

When considering the conversion of a corporation to a limited liability company (LLC) in Missouri, it is essential to understand the potential advantages that this change in business structure may provide. Here are some common reasons for converting Missouri corporation to an LLC:

  • Tax Flexibility: One of the primary reasons Missouri business owners opt to convert their corporation to an LLC is the tax benefits. While corporations are subject to double taxation, where the company’s income and the shareholder’s dividends are taxed, LLCs are considered pass-through entities. This means the business’s income passes through to the owners’ personal tax returns, avoiding double taxation.
  • Simplified Management Structure: Another advantage of an LLC over a corporation is its simplified management structure. Missouri Corporations have a more complex structure with shareholders, Three directors, and officers, while an LLC is managed by its members or designated managers. This can make decision-making and operations more straightforward for small businesses.
  • Reduced Administrative Requirements: Missouri LLCs generally have fewer administrative requirements than corporations, such as lower Annual Report fees and less stringent record-keeping rules. This can save Missouri business owners time and money, allowing them to focus more on growing their businesses.
  • Personal Asset Protection: Both corporations and LLCs offer limited liability protection, meaning the business’s debts and liabilities are separate from the owner’s personal assets. However, some business owners may prefer an LLC’s specific liability protections over a corporation.

Challenges and Considerations

When converting a corporation to an LLC in Missouri, it is essential to consider the potential challenges and implications of the conversion process. Here are some challenges and considerations to keep in mind:

  • Tax Implications: Although converting Missouri corporation to an LLC can offer tax benefits, it’s essential to consider the potential tax implications of the conversion. In some cases, the IRS may treat the conversion as a taxable event, which could result in additional taxes being owed. Consult with a tax professional to understand the tax implications of converting your corporation to an LLC in Missouri.
  • Legal and Financial Advice: Converting Missouri corporation to an LLC can be a complex process, and it’s essential to seek legal and financial advice to ensure that the conversion is done correctly in the business’s best interests.
  • Timing: Converting Missouri corporation to an LLC can take time, particularly if there are regulatory approvals or other requirements to be met. Be prepared for the conversion process to take several weeks or even months to complete.

Benefits of Converting Missouri Corporation to an LLC

Converting a corporation to a limited liability company (LLC) can benefit business owners. These advantages can include:

  • Tax Flexibility: One of the primary benefits of converting Missouri corporation to an LLC is the potential tax advantages. While corporations are subject to double taxation (the company’s income and the shareholder’s dividends are taxed), LLCs are generally considered pass-through entities for tax purposes. This means the business income passes through to the owners’ personal tax returns, avoiding double taxation.
  • Personal Asset Protection: Both corporations and LLCs offer limited liability protection, meaning the business’s debts and liabilities are separate from the owner’s personal assets. However, some business owners may prefer the specific liability protections provided by an LLC over a corporation, depending on the nature of their business and the potential risks involved.
  • Increased Flexibility in Profit Distribution: Unlike Missouri corporations, which typically distribute profits according to the percentage of shares owned, LLCs can offer more flexibility in profit distribution among members. This can be particularly advantageous for businesses with multiple owners who contribute differently to the company’s success.
  • Potential for Easier Transfer of Ownership: Depending on the specific rules and regulations in Missouri, transferring ownership of an LLC may be easier than transferring ownership of a corporation. This is an important consideration for business owners who plan to sell or transfer their business.

While the benefits of converting Missouri corporation to an LLC can be significant, it’s essential to carefully consider the potential challenges and implications of the conversion process.

FAQs

How do I convert a Missouri corporation to a limited liability company?
You will need to file articles of organization for a new Missouri LLC and dissolve your current corporation.
Can I keep my current corporation name for my new LLC?
No, you will need to come up with a new name for your LLC.
How long does it take to convert my Missouri corporation to an LLC?
The process typically takes 4-6 weeks, but it can vary depending on the workload of the Missouri Secretary of State’s office.
Do I need to notify my current customers and employees of the conversion?
No, there is no legal requirement to notify customers or employees of the conversion.
Will I have to pay taxes on the conversion?
No, there is no tax due when converting from a Missouri corporation to an LLC.
Can I still operate my business while the conversion is in progress?
Yes, you can continue to operate your business during the conversion process.
How much does it cost to convert my Missouri corporation to an LLC?
The fee for filing articles of organization for a new LLC in Missouri is $105 as of 2021.
Do I need to obtain new licenses and permits for my new LLC?
It depends on your industry and the licenses and permits required. You should consult with the appropriate state and local agencies.
Will I need to change my tax identification number (TIN)?
No, you can use the same TIN you had for your corporation for your new LLC.
When do I need to file my articles of organization for my new LLC?
You should file your articles of organization as soon as you decide to convert to an LLC.
What is the advantage of converting to an LLC?
LLCs provide limited liability protection for their owners and can offer tax benefits.
Can I still have shareholders in my new LLC?
No, LLCs do not have shareholders. The owners are called members.
Can I have a single-member LLC in Missouri?
Yes, Missouri allows for single-member LLCs.
Will there be any changes to my existing contracts when I convert to an LLC?
It depends on the language of your contracts. You should review them with an attorney.
Can I convert back to a corporation in the future?
Yes, you can convert back to a corporation if you decide it is the best choice for your business.
How is an LLC taxed in Missouri?
An LLC in Missouri can be taxed as a sole proprietorship, partnership, or corporation depending on how the owners elect to have it taxed.
Do I need an attorney to convert my Missouri corporation to an LLC?
It is not required, but it is recommended to have an attorney review the process and advise you on any legal matters.
Will my business have a separate legal entity from me as an owner?
Yes, your LLC will be a separate legal entity from its owners.
What happens to my existing contracts and agreements when I convert to an LLC?
The contracts and agreements would need to be reviewed to determine if any changes need to be made for the conversion.
Do I need to hold a meeting and take minutes to convert to an LLC?
No, there are no formal meeting requirements for Missouri LLC formations.
Will I need to file annual reports for my new LLC in Missouri?
Yes, Missouri requires all LLCs to file an annual report with the Secretary of State.
Can my new LLC have a different ownership structure than my corporation?
Yes, LLCs provide more flexibility in terms of ownership structures than corporations.
Can I have multiple LLCs in Missouri?
Yes, there is no limit to how many LLCs you can form in Missouri.
Do I need to obtain a new EIN for my LLC?
No, you can use the same EIN you had for your corporation if you want to keep the same tax identification number.
Can I convert my out-of-state corporation to a Missouri LLC?
Yes, it is possible to convert an out-of-state corporation to a Missouri LLC, but the process can be complicated.
Do I need to file conversion documents with the Missouri Secretary of State?
It depends on how you are converting and your individual circumstances. You should consult with an attorney.
Can I convert to an LLC at any time during the year?
Yes, you can convert at any time.
What is the dissolution process for my corporation when I convert to an LLC?
You will need to follow the standard process for dissolving a Missouri corporation.
Can a Missouri corporation convert to a limited liability company (LLC)?
Yes, Missouri corporations can convert to LLCs under Missouri law.
What steps do I need to take to convert my Missouri corporation to an LLC?
You will need to file articles of organization with the Missouri Secretary of State’s office, and obtain approval from the Missouri Department of Revenue.
Can I use the same name for my LLC as my Missouri corporation?
Yes, as long as the name is available and is not being used by another business in Missouri.
What are the advantages of converting a Missouri corporation to an LLC?
Limited liability protection, pass-through taxation, and flexibility for ownership and management structure.
Do I have to dissolve my Missouri corporation before converting to an LLC?
No, you do not have to dissolve the corporation before converting to an LLC.
Are there any filing fees or taxes associated with converting to an LLC in Missouri?
Yes, there is a $50 filing fee for articles of organization, and you may owe tax on any assets transferred during the conversion process.
How long does the conversion process typically take in Missouri?
The process can take several weeks, depending on the workload of the Secretary of State and Department of Revenue.
Can an out-of-state corporation convert to an LLC in Missouri?
Yes, as long as the corporation is authorized to do business in Missouri.
Are there any restrictions on what types of corporations can convert to LLCs in Missouri?
Certain regulated industries may have restrictions on converting to an LLC, such as banks or insurance companies.
Is it necessary to hire an attorney to assist with the conversion process in Missouri?
While it is not necessary to hire an attorney, it is highly recommended to ensure the process is done correctly and in compliance with Missouri law.
What are the consequences of not properly converting a Missouri corporation to an LLC?
You could be liable for any debts or liabilities of the corporation, and forego the limited liability protection offered by an LLC.
Are there any ongoing requirements for maintaining an LLC in Missouri?
Yes, in Missouri, LLCs are required to file an annual report with the Secretary of State and pay a $45 fee.
Will the conversion to an LLC affect my business’s contracts or relationships in Missouri?
It may affect contracts or relationships depending on the terms and conditions of the contracts and relationships.
Can an LLC that was once a Missouri corporation retain its existing federal tax identification number after the conversion?
Yes, as long as the LLC elects to be taxed the same as the corporation for federal tax purposes.
Are there any restrictions on the types of businesses that can be structured as LLCs in Missouri?
Missouri does not place significant restrictions on LLC ownership or management structure.
What is the liability protection offered by LLCs in Missouri?
Members of an LLC generally have limited personal liability for business debts and obligations.
Is there a waiting period before the LLC is considered legally recognized in Missouri?
The LLC will be recognized as soon as it files articles of organization and is approved by the Missouri Secretary of State.
Can existing Missouri corporate bylaws serve as LLC operating agreements?
Corporations typically have bylaws while LLCs have operating agreements, and there are differences between the two types of legal documents. It may be necessary to obtain an LLC-specific operating agreement.
Can an LLC structure affect tax liability for business owners in Missouri?
Yes, LLCs are pass-through entities, which means any business income or loss is reported on individual tax returns of LLC members.
Are there limitations on the number of members that can join an LLC in Missouri?
No, there are no minimum or maximum limitations on the number of LLC members in Missouri.
Are there any age limits on LLC members in Missouri?
There are no age limits on LLC members in Missouri.
Are LLCs required to obtain any additional permits or licenses in Missouri beyond what the corporation had?
The type of business permits or licenses needed after converting to an LLC will depend on the type of business being operated.
Can the conversion of a Missouri corporation to an LLC have an impact on existing debts and judgments?
Yes, debts and judgments incurred by the corporation prior to conversion may need to be dealt with differently as an LLC.
Do I need to submit financial statements or records during the conversion process in Missouri?
Financial statements or records may be required for approval of a business succession plan, as part of the conversion process.
Is it necessary to inform customers or vendors of the conversion to an LLC in Missouri?
It is recommended to notify customers and vendors of any changes in business structure or legal status.
Are Missouri businesses required to make any changes to business processes or operations after converting to an LLC?
It will depend on the type of business and other factors, but some operational changes may be necessary.
Can creditors challenge the conversion from a Missouri corporation to an LLC?
Creditors may have the ability to challenge the conversion of a Missouri corporation to an LLC, but the ability to do so depends on state law.
Are Missouri LLCs required to have a registered agent?
Yes, Missouri businesses, including LLCs, are required to have a designated registered agent to receive legal and tax notices.

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Conclusion

Converting Missouri corporation to an LLC can offer significant benefits for your business, including tax flexibility, simplified management, and reduced administrative requirements. However, it’s essential to carefully consider the potential challenges and implications of the conversion process. Following the steps outlined in this guide and seeking professional advice, you can successfully convert your corporation to an LLC and position your business for continued success.

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