How to Convert an LLC to a C Corporation

When starting out, many small business owners, freelancers, and independent contractors operate without selecting a business entity. As their operations mature, some will elect limited liability company (LLC) status to take advantage of the savings and protection this entity provides. However, some businesses will eventually outgrow this status and opt to form as an entity that's more appropriate for larger organizations.

While LLCs are popular due to flexibility from a tax perspective, growing businesses often convert to a C corporation for access to investment capital, the ability to issue different forms of stock, and long-term scalability. Use this blog for guidance in converting your LLC to a C corp in 2026. You'll learn about C corporation conversion methods, weigh potential tax consequences and requirements, and determine when it makes sense to convert strategically.

This way, your business will be ready for the 2026 tax year and beyond. 

LLC vs. C Corporation: Key Differences

C corps and LLCs have key differences you should understand before converting from an LLC into a corporation, including tax payment requirements and tax structure.

 

LLCs

C Corps

Stock issuance

Typically, unable to issue stocks. 

Can issue multiple classes of C corporation stock.

Pass-through taxation vs. double taxation

Pass-through entities, taxes pass through from the company to the owners.  This is a major tax benefit.

Not a pass-through entity; shareholders pay corporate and personal federal income taxes on dividends after they are taxed at the corporate level, a process called double taxation.

Flexibility in taxation

Members can choose to be taxed as a C corp or an S corporation.

Not applicable.

Earnings Retention

May not have easy earnings retention due to taxation on distribution shares.

Generally has easier earnings retention on dividends, which are taxed when distributed.

When Is It a Good Idea To Convert from an LLC to C Corp

It’s wise to focus on your company’s next steps for tax purposes, but as your LLC grows, you may feel compelled to convert it into a C corp.

A few indicators will tell you when it's a good time to do it. Learn how to convert from your LLC to a C corp when you’re seeking to:

  • Raise venture capital (venture capitalists prefer the C corp structure)

  • Issue common or preferred stock

  • Attract outside investors or employees (stock options)

  • Prepare for rapid scaling

  • Reduce self-employment tax exposure

  • Increase credibility and liability protection for directors and officers

What You Need Before Converting

You must follow several steps for a successful LLC to C corp conversion, including: 

  • File Articles of Incorporation with your state's Secretary of State office. 

  • Draft bylaws for the new C Corp.

  • Appoint a corporate board of directors.

  • Elect officers.

  • Hold an initial board meeting. 

  • Issue stock certificates.

  • Obtain a new Employer Identification Number (EIN) if required by the IRS.

  • Update state registrations and business licenses.

  • Open new C corporation bank accounts.

  • Update operating agreements to bylaws.

On top of these requirements, additional steps vary depending on how you choose to convert your LLC to a C corp. Each method affects what you'll need to complete the conversion. 

How to Convert an LLC to a C Corp: 3 Methods

There are three methods to select from when converting your current LLC to a C corporation:

  • Statutory conversion 

  • Statutory merger 

  • Non-statutory conversion

Method 1: Statutory Conversion

The first way to convert your LLC into a C Corp is to do a statutory conversion. This option is newer and easier than other methods, but it is not available in every state. 

A statutory conversion comprises four steps, which are to: 

  1. Prepare a conversion plan. Review your LLC's operating agreement for any conversion rules and then draft a conversion plan. 

  2. Approve a conversion plan. If the LLC has multiple owners, they must approve the conversion before it moves forward. 

  3. File a certificate of conversion. File this document with the C corporation's Articles of Incorporation. 

  4. File forms with the Secretary of State. Once your forms and materials have been prepared, file them with your Secretary of State.

Statutory conversions are unique because this transfer offers valuable features for LLC owners. By converting your LLC to a C Corp through a statutory conversion:

  • The transfer of all of your LLC’s assets and liabilities happens automatically.

  • Your LLC members will automatically convert to C corp shareholders.

  • Unlike other methods, you won’t have to do additional actions for statutory conversions.

Method 2: Statutory Merger

A statutory merger is the second way you can convert your LLC to a C Corp. This process comprises five steps, and it may be best for LLC owners in states that don’t offer statutory conversions.

For a statutory merger, you’ll need to: 

  1. Form a new corporation that’s separate from your LLC.

  2. Have your LLC members approve the merger of the current LLC and the new C corp.

  3. Have your LLC members exchange their membership rights for C corp shares.

  4. File a certificate of merger and any additional required state paperwork.

  5. Dissolve your LLC.

Similar to statutory conversions, statutory mergers allow your LLC assets and liabilities to transfer automatically to your C corp, becoming the corporation's assets. This can be helpful for federal income tax purposes.

Method 3: Non-Statutory Conversion

The last way to convert your LLC to a C corp is by doing a non-statutory conversion. This option may be the most complex and costly method.

To do a non-statutory conversion, you’ll need to: 

  1. Form a new corporation and get approval from LLC members. 

  2. Once approved, manually transfer assets, liabilities, and members' interests guided by separate LLC and C corp agreements.

  3. Once complete, issue stock and dissolve your LLC.

Tax Consequences of Converting an LLC to a C Corp

There are three tax consequences associated with converting your LLC to a C corporation status.

Tax Consequence 1: Loss of Pass-Through Status

It's important to understand your new C corp's tax status. When you convert your LLC to a C corp, your business loses pass-through taxation.  

  • LLC members, now C corp shareholders, stop reporting profits on personal returns.

  • Your business is now subject to double taxation.

    • Income is first taxed at the 21% corporate income tax rate. 

    • Shareholders are taxed on any distributed dividends at a personal income tax rate. 

Tax Consequence 2: Changes in Business Taxation Structure

The second tax consequence involves changes in your business taxation structure. Instead of pass-through taxation, where your operations aren't taxed, your business and your shareholders will both be taxed when operating as a C corp, called double taxation.

Other changes include: 

  • Payroll tax treatment. Formal payroll now applies to employees and owners. 

  • Owner compensation rules. Owners will now have a salary, which they pay taxes on, along with dividends. 

  • Corporate deductions. Owners can now deduct costs that are unavailable to LLCs, including retirement plan contributions.  

  • Corporate retained earnings rules. These rules govern the retained earnings of the C corp after dividends are distributed. 

  • C corps may enable tax planning for reinvested profits. Profits reinvested back into your business aid in growth, acquisitions, and new employee hires. 

Tax Consequence 3: Conversion May Be Taxable to the LLC

The conversion of an LLC into a C corp may be taxable for some LLCs. LLC members may incur taxable gain if:

  •  The LLC has debt.

  • Members previously deducted expenses funded by borrowed money.

  • Asset transfers trigger gains.

Conversions from an LLC to a C corp are often tax-free when structured properly. Talk to a CPA prior to converting to review your assets, tax basis, and debt structure.

How to Minimize Taxes When Converting to a C Corp

While many conversions are tax-free, some will come at a cost to business owners. Minimize your taxes when converting from an LLC to a C corporation by: 

  • Reviewing your asset basis.

  • Avoiding deemed distributions.

  • Timing the conversion before major revenue and taxable events.

  • Considering the 351 exchange treatment.

  • Avoiding triggering gain on appreciated assets.

Work With a Professional

Converting your LLC to a C corporation is a significant step that affects taxes, liability, and structure. Each method of conversion comes with its own set of challenges and nuances that are best handled with affordable, tax-deductible support.

1-800Accountant, America's leading virtual accounting firm, can simplify this process for you. Our CPAs, EAs, and other tax professionals help you choose the right method, prepare filings, and avoid unexpected tax consequences. Talk to a business tax advisor to get started by scheduling a free 30-minute consultation.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.