Q: I formed a corporation, but I want to convert it to an LLC. Can you help with this?
Thank you to Rene and Tara from Mind Body Bloom (@mindbodybloomu) in Seattle, Washington, for that great question! Washington State allows corporations to become LLCs (or vice versa) through a process called conversion. To convert your corporation into an LLC in Washington, you’ll need to file Articles of Conversion with the Washington Secretary of State. However, conversion isn’t as simple as just submitting a form. First, the board of directors need to adopt a plan of conversion, which must be approved by the shareholders. We’ll take you step by step through the process of converting your corporation into an LLC in Washington.
Step 1. Choose a Business Name.
Since your business is becoming a new entity type, it won’t be able to keep the exact same name it had as a corporation. For the most part, Washington’s naming requirements for LLCs are the same as for corporations (see RCW 23.95.305). However, your new LLC name must include the words “limited liability company” or an abbreviation such as “limited liability co.” or “LLC.” Your LLC name can’t include words or abbreviations reserved for corporations, such as “incorporated,” “inc.” or “corp.”
If you’re only changing your entity identifier—for example, from Nancy’s Bookstore Inc. to Nancy’s Bookstore LLC—you won’t need to check on whether your business name is available. However, if you’re choosing an entirely new name—such as New Perspectives Books, LLC—you should first search the Washington Corporations and Charities Filings System to make sure your preferred name isn’t already taken. The Secretary of State will reject your filing if your business name is too similar to the name of another Washington business.
Step 2. Complete the WA Certificate of Formation.
In order to convert your corporation into a Washington LLC, you’ll need to complete a form called the Washington Certificate of Formation. This form asks for information about your business, including your new business name, registered agent information, and principal office address. You’ll submit this form to the Washington Secretary of State along with your Articles of Conversion.
Step 3. Create a Plan of Conversion.
Next, your board of directors must adopt a plan of conversion. This is an internal document that lays out your business’s plan to convert from a corporation to an LLC. According to RCW 25.15.436, your plan of conversion must include:
- The name and entity type of your business before conversion.
- The name and entity type of your business after conversion.
- The terms and conditions of the conversion—how the interests, assets, and debts of the converting business will be transferred to the converted business.
- The organizational documents (Certificate of Formation) of the converted entity (your new LLC).
Your corporation’s shareholders must then vote to approve the plan. Depending on the policies in your corporate bylaws, you may only need majority approval to approve the plan of conversion, or you may need unanimous approval.
Step 3. Draft Washington Articles of Conversion.
Once your plan of conversion has been approved, you can draft Articles of Conversion, which is the document you’ll submit to the Secretary of State’s office to officially convert your corporation into an LLC. There is no form for Washington Articles of Conversion, so you’ll need to create your own. We recommend getting advice from a CPA or business attorney before submitting your Articles of Conversion. According to RCW 23B.09.040, your Articles of Conversion must include:
- A statement that your corporation has been converted into an LLC.
- The name and entity type of the business before conversion.
- The name and entity type of the business after conversion.
- The date the conversion will become effective.
- A statement that the conversion was approved by the shareholders.
Step 5. Complete your Conversion Cover Sheet.
To make sure your entity conversion is processed quickly by the state, you should include a Conversion Cover Sheet with your filing. This form asks for basic information about your business conversion and a contact phone number in case the state has an issue with your filing.
Step 6. File documents to the WA Secretary of State.
Next, submit your Certificate of Formation, Articles of Conversion, Conversion Cover Sheet and payment to the Washington Secretary of State. These documents can be submitted by mail or in person.
Secretary of State
PO Box 40234
Olympia, WA 98504-0234
801 Capitol Way S
Olympia, WA 98501-1226
How much does entity conversion cost in Washington State?
The filing fee for entity conversion in Washington is $190. If you’re in a hurry, you can pay an extra $50 for expedited filing.
Step 7. Obtain a new EIN.
LLCs are taxed differently from corporations by default. While a corporation is taxed as a C-corp by default, an LLC is taxed as a partnership or sole proprietorship unless it files for corporate tax status. This means that a corporation that changes into an LLC needs a new EIN. You can apply for an EIN directly from the IRS online or by mail for free.
Learn How to Get an EIN.
Step 8. Draft an LLC operating agreement.
While corporations are governed by corporate bylaws, LLCs are governed by an operating agreement. Your operating agreement is an internal document drafted by the members of your LLC that determines your LLC policies for voting, transferring membership interest, and other important issues. You don’t need to submit your operating agreement to the Secretary of State, but you should keep it with your business records and refer to it when making important business decisions.
Check out our free, attorney-drafted Washington LLC Operating Agreement templates.