Corporation to LLC: Indiana Conversion Guide 2024

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How to Convert Corporation to LLC in Indiana

The decision to convert a corporation to an LLC in Indiana can provide numerous benefits, including improved tax flexibility, simplified management, and reduced compliance burdens. If you’re considering this strategic move, our comprehensive guide will support you through the process of starting an LLC in Indiana, equipping you with the knowledge to successfully convert your corporation to an LLC in Indiana.

At LLCBase, we aim to make the transition as smooth as possible by providing a step-by-step guide that covers legal requirements, tax implications, and necessary paperwork. Let’s explore the exciting world of corporation-to-LLC conversions in the dynamic Indiana business landscape!

What are a Corporation and an LLC

A corporation is a type of business structure that is a separate legal entity from its owners, known as shareholders. This legal distinction provides shareholders with limited liability protection, meaning their personal assets are not at risk in the event of the corporation’s debts or legal issues. Corporations are subject to more stringent regulations and requirements than other business structures, such as keeping detailed records, holding annual meetings, and filing separate tax returns. Corporations can also issue shares of stock to raise capital and can exist perpetually beyond the life of their owners.

On the other hand, an LLC, or Limited Liability Company, combines a corporation’s limited liability protection with the operational flexibility of a partnership or sole proprietorship. In an LLC, the business owner, known as a member, has personal liability protection, meaning their personal assets are not at risk in case of the business’s debts or legal issues. LLCs also have flexible tax options, as they can be taxed as a pass-through entity (like a sole proprietorship or partnership) or a corporation. This type of business structure is more straightforward to set up and manage than a corporation and offers legal and tax benefits for the owner.

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9 Steps to Convert From Corporation to LLC

Converting your corporation to an LLC in Indiana is made simple with our 9-step process. By following these steps, you’ll receive expert guidance through each conversion stage, ensuring a smooth and efficient transition for your business.

We’ve also compiled a list of the best business attorneys in Indiana who can provide valuable legal services when converting from a Corporation to an LLC. Browse through their expertise for the perfect assistance!

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If you decide to do it yourself, just follow the following steps of converting a corporation to an LLC below:

Step 1: Research Indiana LLC Conversion Laws

Before starting the process, it’s essential to understand the specific laws and regulations governing LLC conversions in your state. To gather accurate information, visit your state’s Indiana Secretary of State website and other government resources, such as the Indiana Department of Revenue and Indiana Secretary of State. These resources will provide the necessary guidelines, requirements, and forms for converting a corporation into an LLC in Indiana.

As you research, you must familiarize yourself with required fees, such as the $95, which may vary depending on the state. Additionally, take note of any relevant tax rates that may apply to your new LLC, including the 4.90% income tax and 7.00% sales tax. Understanding these tax rates will help you make informed decisions about your business structure and ensure that your conversion to an LLC in Indiana complies with all state-specific tax laws.

In some cases, additional requirements or regulations may apply to specific industries or business activities. Be sure to research industry-specific regulations and consult an attorney if you have questions about your situation.

Overall, thorough research is critical for successfully converting your corporation to an LLC in Indiana. By understanding the state-specific laws and requirements, you’ll be better prepared to navigate the conversion process and make the transition as seamless as possible.

Step 2: Determine the Type of Conversion

In some states, you can convert a corporation to an LLC using either statutory conversion or statutory merger. These two methods have distinct processes and requirements, so it’s crucial to research their differences and choose the best fit for your situation.

A statutory conversion is a more straightforward process wherein a corporation directly converts into an LLC. This method typically involves filing Articles of Conversion with the Indiana Secretary of State and paying the associated state incorporation fee. 

On the other hand, a statutory merger involves merging the existing corporation with a newly formed LLC, effectively transferring the corporation’s assets and liabilities to the LLC. This process may require additional documentation, such as a Plan of Merger or Articles of Merger, and might be subject to a separate fee.

Factors to consider when choosing between these two methods include the complexity of the process and if the two ways, online and by mail is available in your state. Additionally, take note of the associated incorporation fee of$30 for filing online and by mail, as this may impact your decision.

If you need more clarification or are trying to decide which conversion method is best for your situation, consult a business attorney. They can help you navigate the complexities of the process and ensure that you comply with all state-specific laws and regulations for converting a corporation to an LLC in Indiana.

Step 3: Hold a Shareholder Meeting

Notifying all corporation shareholders about your plans to convert to an LLC in Indiana is crucial in the conversion process. To do this, schedule a shareholder meeting to discuss the conversion, its benefits, and potential challenges. Ensure that you provide adequate notice to all shareholders as required by your corporation’s bylaws or state regulations.

During the meeting, present your case for converting the corporation to an LLC, addressing any concerns or questions from shareholders. Depending on your corporation’s bylaws and Indiana regulations, you may need to obtain approval from a specific percentage of shareholders (voting threshold) to proceed with the conversion.

It’s essential to document the meeting minutes accurately, including the details of discussions, any voting results, and the resolutions approving the conversion. These records may be required when filing the Certificate of Existence and any necessary Certificate of Amendment documents with the Indiana Secretary of State. Proper documentation can also help protect the company and its shareholders in case of any future disputes or legal issues related to the conversion.

Step 4: File the Necessary Documents

Once you have determined the type of conversion and obtained shareholder approval, the next step is to file the required documents with the Indiana Secretary of State. Depending on the conversion method you’ve chosen, the forms you need to submit may vary:

  1. Statutory Conversion: If using this method, file the Articles of Conversion, which provide details about your corporation and the new LLC, including the name, principal address, and Registered Agent information. 
  2. Statutory Merger: In this case, you’ll need to submit a Certificate of Merger or similar document outlining the merging entities, the surviving LLC’s name and structure, and the terms and conditions of the merger.

Be sure to include all necessary information in these documents and double-check for accuracy to avoid any delays or issues during the filing process. When submitting your paperwork, pay the required fees, such as the $100 (by mail and $95 online).

In addition to the conversion documents, ensure you meet the state name reservation period of 120 days requirements for reserving your new LLC’s name. Depending on your state’s regulations, you may need to pay the $20 or $20 to reserve your desired name. Remember that some states may have specific naming conventions or restrictions for LLCs that you need to follow.

Step 5: Create an LLC Operating Agreement

Draft an operating agreement for your new Indiana LLC. This document outlines your LLC’s management structure, ownership, and operational rules. While not always legally required, having a well-drafted operating agreement is crucial for protecting your business, establishing clear guidelines, and avoiding future disputes among members.

When creating your LLC operating agreement, be sure to address the following items specific to your Indiana:

  • Annual report requirements: Detail the frequency and deadlines for filing an annual report in Indiana, if applicable. In Indiana, the annual report must be filed every 2 years. Clarify the information required for these reports and assign responsibility for their timely submission.
  • Annual fee obligations: Specify the $0 because it is not mandatory that your LLC must pay to maintain its good standing in Indiana. Outline the payment process, including relevant deadlines and the party responsible for payment.
  • Franchise tax: Your Indiana LLC is subject to an annual franchise tax of No franchise tax, including information about the tax rate, calculation method, filing deadlines, and payment procedures. Make it clear which member or manager is responsible for managing and submitting the franchise tax payments.
  • Franchise tax penalty: If your LLC fails to submit the annual franchise tax on time, outline the potential late filing fees and penalties that may apply. In Indiana, the penalty for late filing of franchise tax is in Indiana, there is no late filing.  Specify the procedure for addressing late payments and resolving any issues with the Indiana tax office.

Addressing these critical aspects in your operating agreement ensures that your Indiana LLC remains compliant with all state regulations and requirements, minimizing the risk of penalties or disputes among members.

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Step 6: Obtain New EIN

Apply for a new EIN from the IRS for your Indiana LLC. This unique nine-digit number is assigned to your business for tax, reporting purposes, and other essential functions. You can apply for an EIN online through the IRS website, which is often the fastest and most convenient method. Alternatively, you may apply via mail or fax by submitting Form SS-4, depending on your preference and the urgency of your application.

Once you have obtained your new EIN, updating all relevant tax and business documents with your new number is crucial. This includes updating the NT-20A – Application for Sales Tax Exemption filed with the Indiana Department of Revenue to ensure accurate reporting and compliance with Indiana tax regulations. Additionally, update any other federal, state, and local tax forms or registrations that require your EIN, such as payroll tax filings, sales tax permits, and any required business licenses or permits.

Inform your bank, financial institutions, and other relevant parties of your new EIN to ensure all accounts, loans, and financial transactions are associated with your Indiana LLC’s correct tax identification number.

By obtaining a new EIN and updating all relevant documents and accounts, you can ensure a smooth transition of your business operations under your new Indiana LLC structure, maintaining compliance with all tax and reporting requirements.

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Step 7: Update Licenses and Permits

Notify all relevant federal, state, and local agencies of your business’s conversion to an LLC in Indiana. This includes but is not limited to, the Indiana Secretary of State, the  Indiana Department of Workforce Development, the Indiana Secretary of State, the Indiana Department of Revenue, and any other regulatory bodies overseeing your industry or business activities. Informing these agencies of your new LLC structure ensures that your business remains compliant with all applicable regulations and maintains accurate records.

Update any Indiana licenses, permits, or registrations your business holds to reflect your new Indiana LLC structure and ownership. This may involve applying for new licenses or permits, transferring existing ones, or amending the information on file with the issuing agencies. Review the specific requirements and procedures for each license or permit, as these may vary between federal, state, and local levels.

In addition to updating your licenses and permits, you may need to update your information with the Indiana Secretary of State. This could include filing an amendment to your Articles of Organization  or notifying the Indiana Secretary of State of changes to your Registered Agent or business address. Consult the Indiana Secretary of State website or contact their office for guidance on updating your business’s information following the conversion to an LLC.

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Step 8: Inform Creditors and Other Stakeholders

Notify all creditors, suppliers, customers, and other stakeholders of your corporation’s conversion to an Indiana LLC. This ensures they know the change and can update their records, contracts, and invoices accordingly. Be transparent and proactive in communicating this information to maintain trust and minimize potential disruptions to your business relationships.

Be prepared to provide these parties with any necessary documentation related to the conversion, such as your new EIN, updated operating agreement, or new licenses and permits. Providing this information on time can help facilitate a smooth transition and keep your business operations running smoothly.

Step 9: Close the Corporation

After completing the conversion process and successfully establishing your new Indiana LLC, you may be required to dissolve the corporation formally. Dissolving the corporation ensures that it is no longer considered a separate legal entity and releases you from any ongoing compliance obligations related to the corporation.

Follow your state’s guidelines for dissolving a corporation in Indiana, which can typically be found on the Indiana Secretary of State website or by contacting their office. The process may involve submitting a Certificate of Dissolution or similar document and any required fees.

As part of the dissolution process, you may need to file a final tax return for the corporation, settle any outstanding debts or liabilities, and distribute the remaining assets to shareholders by your corporation’s bylaws or state law. Consult with legal and financial advisors to ensure you complete all necessary steps to dissolve the corporation properly and comply with your state’s regulations.

By diligently informing all stakeholders of your corporation’s conversion to an Indiana LLC and formally dissolving the corporation, you can ensure a seamless transition and protect your business interests as you move forward under the new LLC structure.

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Why Change from Corporation to LLC in Indiana

While both entities offer limited liability protection to their owners, there are several reasons why converting to an LLC may be beneficial. Let’s explore why business owners may change from a corporation to an LLC in Indiana.

  • Tax Flexibility: One of the most significant advantages of an LLC over a corporation is its tax flexibility. By default, LLCs are considered pass-through entities for tax purposes, meaning that the company’s profits and losses are passed through to its members, who report them on their personal income tax returns. This avoids the double taxation faced by corporations, where profits are taxed at the corporate level and again at the individual level when dividends are distributed to shareholders. By converting to an LLC in Indiana, business owners can take advantage of pass-through taxation, potentially resulting in significant tax savings. Also, LLCs can be taxed as a corporation if it becomes more advantageous.
  • Simplified Management Structure: LLCs offer a more flexible and straightforward management structure than corporations. While corporations require a board of directors to oversee the company’s operations and make major decisions, LLCs can be managed directly by their members (member-managed) or appoint managers to oversee business operations (manager-managed). By converting to an LLC in Indiana, business owners can streamline their company’s management structure and reduce the administrative burden associated with maintaining a board of directors, holding shareholder meetings, and keeping minutes of all corporate meetings.
  • Fewer Compliance Requirements: LLCs typically have fewer compliance requirements than corporations, making them easier to maintain and manage. For example, LLCs can hold annual meetings, maintain a board of directors, or adhere to corporations’ formalities. By converting to an LLC in Indiana, business owners can reduce the time and resources spent on meeting various compliance requirements, allowing them to focus more on their core business operations.
  • Increased Asset Protection: LLCs may offer additional asset protection benefits in some states than corporations. For example, some states provide charging order protection for LLCs, which limits a creditor’s ability to seize a member’s ownership interest in the LLC. This can be particularly important for business owners concerned about protecting their personal assets from potential business liabilities. By converting to an LLC in Indiana, business owners may be able to take advantage of these additional asset protection benefits, depending on the specific regulations in Indiana.
  • Customizable Operating Agreement: LLCs can create a customized operating agreement that outlines the company’s management structure, ownership, and operational rules. This allows business owners to tailor the agreement to suit their specific needs and preferences instead of the more rigid bylaws required by corporations. By converting to an LLC in Indiana, business owners can create an operating agreement that better aligns with their business goals and desired management structure.

FAQs

What is the process to convert a corporation to an LLC in Indiana?
The process involves filing articles of organization, adopting an LLC operating agreement, and obtaining any necessary licences and permits.
Is it necessary to dissolve a corporation before converting it to an LLC in Indiana?
No, it is not necessary, and in fact, the corporation can remain in existence as the owner of the LLC.
Are there any tax implications of converting a corporation to an LLC in Indiana?
Yes, there may be tax implications, so it is important to consult with an accountant or tax professional.
What fees must be paid to convert a corporation to an LLC in Indiana?
The filing fee for articles of organization is $90 in Indiana.
Does an Indiana corporation have to file articles of dissolution before filing articles of organization for an LLC?
No, it is not necessary to file articles of dissolution, but it is recommended to avoid confusion.
Is there a minimum age requirement to be a member of an LLC in Indiana?
No, there is no minimum age requirement for an LLC member in Indiana.
Can an Indiana corporation convert to an LLC while in bankruptcy?
Yes, but the cooperation of the bankruptcy court may be required.
Can a dissolved corporation be converted to an LLC in Indiana?
No, a corporation must be in good standing to convert to an LLC.
How long does it take to convert a corporation to an LLC in Indiana?
The process can usually be completed in a matter of weeks.
Does an LLC have limited liability protection in Indiana?
Yes, an LLC offers limited liability protection to its members.
How many members must an LLC have in Indiana?
An LLC can have one or more members in Indiana.
Can a corporation operate as an LLC without converting?
No, a corporation has a different structure and legal liability than an LLC.
What is the effect of converting a corporation to an LLC in Indiana?
The corporation ceases to exist as a legal entity and is replaced by the LLC.
Is a foreign corporation allowed to convert to an LLC in Indiana?
Yes, as long as it meets the requirements of the state’s business laws.
Can a corporation convert to an LLC in Indiana if it has debts or obligations?
Yes, but it is important to address any outstanding debts or obligations before the conversion takes place.
What is the liability of members in an LLC in Indiana?
Members of an LLC are generally only liable for the debts and obligations of the LLC to the extent of their investment in the business.
What happens to the stock of a corporation when it becomes an LLC in Indiana?
The corporation’s stock is typically cancelled and exchanged for membership interests in the newly formed LLC.
Do existing contracts and agreements need to be modified after a corporation is converted to an LLC in Indiana?
Yes, contracts and agreements should be reviewed and modified as necessary to reflect the change in entity type.
Can an LLC be formed by members of the same corporation without converting the corporation?
Yes, it is possible to form a new LLC apart from the existing corporation.
​Can a commercial registered agent assist me with converting a corporation to an LLC in Indiana?
Yes, a commercial registered agent can help with filing the necessary paperwork with the state.
Can an Indiana LLC convert to a corporation in the future?
Yes, by filing articles of incorporation with the state.
What is the definition of an LLC in Indiana?
An LLC is a legal entity that provides limited liability protection to its members, while offering flexibility in management and taxation.
Does a corporation need to give notice to its shareholders before converting to an LLC in Indiana?
Yes, shareholders should be notified of the planned conversion, but their approval is not typically required.
Are Indiana LLCs required to have an operating agreement?
No, but it is recommended to establish the rights and responsibilities of the members of the LLC.
Can a corporation located in a different state convert to an LLC in Indiana?
Yes, as long as it meets the requirements of the state’s business laws.
Who is responsible for drafting an LLC operating agreement in Indiana?
The members of the LLC are responsible for drafting an operating agreement, although an attorney can provide assistance.
Can a professional corporation convert to an LLC in Indiana?
Yes, professional corporations can convert to LLCs, but certain professions may have specific requirements.
Are Indiana LLCs taxed as a separate entity?
No, LLCs are typically taxed as pass-through entities, with profits and losses being reported on the members’ individual tax returns.
What is the difference between a public benefit corporation and an LLC in Indiana?
While both entities are focused on social or environmental goals in addition to financial goals, a public benefit corporation has greater legal obligations to achieve its mission than an LLC.
What is the procedure for converting a corporation to an LLC in Indiana?
To convert a corporation to an LLC in Indiana, you need to file Articles of Organization with the Secretary of State.
What is the difference between a corporation and an LLC in Indiana?
A corporation is a separate legal entity from its owners, while an LLC is a hybrid business structure that combines aspects of a partnership and a corporation.
Why would a business want to convert from a corporation to an LLC in Indiana?
A corporation may want to convert to an LLC to take advantage of pass-through taxation, which can lower the overall tax burden for the business and its owners.
How much does it cost to convert a corporation to an LLC in Indiana?
The fee for filing Articles of Organization to convert a corporation to an LLC in Indiana is $90.00
What are the major tax implications of converting a corporation to an LLC in Indiana?
In Indiana, a corporation can be subject to the state’s corporate income tax, while a properly structured LLC may be able to avoid this tax.
Can a corporation that is being dissolved also be converted to an LLC in Indiana?
Yes, a corporation can be converted to an LLC even if it is being dissolved as part of the process.
Does the old corporation still exist after converting to an LLC in Indiana?
No, the old corporation is dissolved and ceases to exist once the LLC conversion process is complete.
Is it necessary to obtain a new EIN after converting a corporation to an LLC in Indiana?
Yes, a new EIN must be obtained for the LLC after the conversion process is complete.
How does the liability of the LLC differ from that of a corporation in Indiana?
The owners of an LLC generally have limited personal liability for the actions of the business, while shareholders of a corporation can potentially be held liable for the corporation’s debts and legal judgments.
Is it necessary to notify the state of Indiana’s tax department of the LLC conversion?
Yes, it is recommended to notify the Indiana Department of Revenue of the LLC conversion to ensure that the business’s tax obligations are properly handled.
Is there a deadline for converting a corporation to an LLC in Indiana?
No, there is no deadline for converting a corporation to an LLC in Indiana.
Does the LLC have to adopt new bylaws after the conversion process in Indiana?
Yes, new bylaws must be adopted for the LLC in Indiana after the conversion process is complete.
How long does the LLC conversion process typically take in Indiana?
It typically takes around 7-10 business days for Articles of Organization to be processed by the Indiana Secretary of State.
What is required to dissolve a corporation in Indiana before the LLC conversion process can begin?
All outstanding debts and obligations must be settled, and any necessary notifications must be made to employees, vendors, and other stakeholders.
What happens to the corporation’s contracts and agreements during the conversion process in Indiana?
The LLC assumes all existing contracts and agreements of the corporation during the conversion process in Indiana.
Are there any restrictions on the types of corporations that can be converted to an LLC in Indiana?
No, any type of corporation can be converted to an LLC in Indiana.
Does Indiana state law require a business to have attorneys assist with the LLC conversion process?
No, an attorney is not required for the LLC conversion process in Indiana, but it is recommended to seek professional guidance.
Can a corporation that is being sued still undergo the LLC conversion process in Indiana?
Yes, a corporation that is being sued can still undergo the LLC conversion process in Indiana.
What are some common mistakes that businesses make during the LLC conversion process in Indiana?
Common mistakes include not properly notifying employees and vendors, failing to update licenses and permits, and not obtaining a new EIN for the LLC.
Are there any publications that businesses can consult for guidance on the LLC conversion process in Indiana?
The Indiana Secretary of State and Indiana Department of Revenue websites provide information and resources for businesses undergoing the LLC conversion process.
Does Indiana provide any tax incentives for businesses that convert from a corporation to an LLC?
Indiana does not provide any specific tax incentives for businesses that convert from a corporation to an LLC.
Can a corporation with multiple shareholders all convert to a single-member LLC in Indiana?
Yes, a corporation with multiple shareholders can all convert to a single-member LLC in Indiana.
Do Indiana businesses need to notify their customers of an LLC conversion?
There is no legal requirement to notify customers of an LLC conversion, but it may be beneficial to do so in order to avoid confusion.
Can an LLC conversion still occur if a corporation has outstanding lawsuits against it?
Yes, an LLC conversion can still occur even if a corporation has outstanding lawsuits against it.
Will the business name of a corporation remain the same after converting to an LLC in Indiana?
The business name can remain the same after converting to an LLC in Indiana, but it must include the letters “LLC” or “L.L.C.” to indicate the change in business structure.
Can a corporation convert to an LLC without the approval of shareholders in Indiana?
Yes, a corporation can convert to an LLC without shareholder approval in Indiana.
How can a corporation ensure a smooth transition to an LLC in Indiana?
By properly notifying stakeholders, updating licenses and permits, and seeking professional guidance, a business can make the LLC conversion process as smooth as possible.
What are the voting requirements for an LLC in Indiana?
In Indiana, any decision by an LLC must be approved by a majority vote of the members unless the operating agreement provides for a greater percentage.
Is a public announcement required after the LLC conversion is complete in Indiana?
No, there is no legal requirement to make a public announcement after the LLC conversion process is complete in Indiana.

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Conclusion

Converting a corporation to an LLC in Indiana can offer numerous advantages, including tax flexibility, simplified management, and reduced compliance requirements. By following the steps outlined in this article, you can successfully navigate the conversion process and unlock the full potential of your new Indiana LLC. To learn more about LLC formation, compliance, and other essential business topics, visit LLCBase and explore our resources to help you build a thriving and compliant business. Don’t miss out on the benefits of an Indiana LLC – take the first step in your business transformation journey today!

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