C Corp to LLC Conversion: 3 Ways to Change Your Business Structure

Your business will go through many changes as it grows. However, as you expand into new markets and attract new customers, you may discover that the structure you started with doesn’t suit your needs anymore.

Fortunately, it’s possible to convert a C Corp to an LLC. This guide highlights the difference between a corporation and an LLC, why you may want to convert, and the benefits conversion can bring.

Key Takeaways

C Corporation owners deal with double taxation and strict management structures, while an LLC provides pass-through taxation and enhanced flexibility.

A statutory conversion is the simplest method to convert a C Corp to an LLC, but it is limited to certain states.

Statutory mergers and non-statutory conversions are additional options for a C Corp conversion.

Why Change a C Corp to an LLC?

Changing a C Corp to an LLC structure can be complicated. Depending on the state where you formed the corporation using a C Corp formation service, you may have the option of a simple conversion without dissolving the original corporation. However, not all states offer this, making the process more complex.

But why would business owners decide to shift the C Corporation to a limited liability company? Here are some possible reasons:

• Avoiding the double taxation of C Corporations, as LLCs can undergo pass-through taxation
• Accessing a less formal hierarchy that doesn’t require a board of directors
• Gaining more control over business decisions
• Having profits that aren’t tied to shares
• Limiting the liability that investors or members incur

Double taxation is a common reason for conversion. A profitable C Corp pays corporate income tax on its earnings, and then shareholders pay tax again on any dividends, so money can be taxed twice before it ever reaches an owner's pocket. For a small or closely-held business without outside investors pushing for corporate structure, that second layer of tax often outweighs the benefits of staying a C Corp.

Let’s take a deeper look at some of these differences.

C Corp vs LLC: Key Differences for Business Owners

Understanding the primary differences between a C Corp and an LLC helps you make an informed choice about conversion.

One attractive variance is the differing management structure of LLCs. LLCs don’t require a board of directors, adhere to one specific hierarchy, or utilize traditional job titles. For example, in an LLC, there’s no need to have CEOs and VPs if owners don’t want to.

Taxation is another strong motivator. In the eyes of the IRS, LLC companies are intrinsically linked to the owners rather than entirely separate entities. Owners are called members and can opt for the IRS to tax the entity as a partnership, a corporation, or a disregarded entity on the owner’s individual income tax return.[1]

If a limited liability company offers so many benefits, why don’t all C Corporation owners opt to convert to LLCs? There are numerous reasons why:

• Expensive conversion costs, depending on the state
• Increased tax bills, as there’s no guarantee that pass-through taxation will be cheaper
• Complicated transfer of membership
• Generally, it is less attractive to venture capitalists or angel investors as an LLC
• Potentially fewer ways to reward employees due to the lack of shares

Business owners should always seek advice from business filing specialists with experience in the state where their business was first incorporated. This will determine conversion methods, costs, and regulations around where to file relevant documents.

3 Ways to Change Your Business From a C Corp to an LLC

If you’ve decided that the benefits of an LLC are right for your business, you need to know how to change a C Corp to an LLC structure.

There are three main methods for approaching LLC conversion. However, not all methods are available in every state, so check with your accounting professionals to better understand the options available.

1. Statutory Conversion

Every state now has some statutory path for converting a corporation into an LLC, but not every state offers a direct statutory conversion. Some require a statutory merger instead. Where a statutory conversion is available, it's the simplest method and requires:

• A vote from the board of directors to convert
• A plan of conversion approved by the board of directors and shareholders
• Your completed articles of incorporation
• A certificate of conversion
• A payment method for the state filing fees

If this process is approved, your new LLC can retain the same name and EIN as the C Corporation.

Your exact cost depends entirely on which state your corporation calls home. Most states charge you for two separate filings, one for the certificate of conversion and one for your new LLC's formation document, so the number is rarely as simple as a single flat fee. Here's what that breakdown looks like in five states with confirmed, published fees.

2. Statutory Merger

An entity merger is another way to convert C Corps to LLCs. The first two points in the process above remain the same — owners must gain the approval of the board of directors and shareholders prior to proceeding with this process.

The statutory merger process is as follows:

• Form a new LLC
• Gain a formal vote from shareholders to exchange shares for LLC membership
• File a certificate of merger with the Secretary of State’s office
• File the appropriate documentation to dissolve the original C Corp

After a statutory merger, you’ll require a new Employer Identification Number (EIN). The cost of completing a statutory merger depends on the LLC incorporation fees in your state.

The timeline can also vary depending on how long it takes to contact all shareholders and the backlog of requests in your state.

3. Non-Statutory Conversion

A non-statutory conversion, or a non-statutory merger, is complex, costly, and potentially time-consuming. Consulting an expert is essential for positive outcomes when utilizing this process.

Rather than merging two entities, this method involves the creation of an LLC and the dissolution of the C Corp as two distinct processes. The steps involved are as follows:

• Form a new LLC.
• Make a formal application to transfer the C Corp’s assets to the LLC
• Create a separate contract to transfer corporation shareholders to LLC members, with their approval
• File for liquidation of the C Corporation with the Secretary of State's office

New LLCs incorporated in this way always require a new EIN.

What to Do After Converting Your C Corp to an LLC

Congratulations, your established business or blossoming startup is now an LLC. Here are the final steps to check:

• Obtain a new EIN if you followed the merger or non-statutory process
• File Articles of Organization that establish the firm as a distinct legal entity
• Create an operating agreement that specifies members’ roles and responsibilities
• Open a business bank account solely for the new LLC to pay employees, taxes, etc.

Ensure all members are happy with the new management structure and be open to discussion and feedback at this early stage. Members should understand any changing tax implications before the conversion process reaches this stage. However, be transparent in communications to secure the trust of all members.

Not sure which method applies to your state?

Talk to a Swyft Filings business formation specialist. We handle statutory conversions, mergers, and EIN filings so you don't have to figure it out alone.

Bibliography

1. IRS.gov. “Limited Liability Company (LLC).” Accessed July 2, 2026.
2. California Secretary of State. “Conversion Information.” Accessed July 2, 2026.