Posted by: Sep 21, 2021

Texas Plan of Conversion

Changing the form of your registered Texas business without dissolving it first is typically called statutory conversion or a Texas plan of conversion.

A Texas plan of conversion can be a cheap and simple way to change the form of a business entity. Mergers or dissolutions and re-formations are time-consuming and expensive.

A plan of conversion can be a good option for businesses that have a clear idea of what they want to achieve by converting the form of their business entity.

When considering a plan of conversion, contact our team at The Curley Law Firm. Adam Curley and his team have more than a decade of experience helping Texas businesses like yours.

What Is a Texas Plan of Conversion?

A Texas entity conversion has several steps. One of those steps includes the Texas plan of conversion.

Examples and Reasons for a Texas Plan of Conversion

A typical example is changing your limited liability company into a corporation.

There are a number of reasons that a Texas business would want to change its registered form.

Converting your business entity through a Texas plan of conversion often involves much less hassle than dissolving your company and starting again.

A business may want to change its type of registered entity form for any number of reasons. For example, a limited liability company (LLC) may want to turn itself into a corporation to take advantage of different tax benefits.

Owners may even want to become a corporation to be able to provide employees with equity in the company or to more easily attract outside investors. 

Conversely, a corporation might seek to convert to an LLC to have more business flexibility and to avoid the need to please many shareholders. It may also want to enjoy the benefits of LLC pass-through taxation. Conversions also occur to avoid the onerous administrative and paperwork burdens that come with incorporation.

Steps to a Texas Entity Conversion

To convert your LLC to a corporation (or vice versa):

  • Review your entity’s formation documents;
  •  Confirm that a conversion is permitted;
  • File a Certificate of Conversion with the Texas Secretary of State;
  • Include the Certificate of Account Status with your filing; and
  • Adopt a Texas plan of conversion and file it with the state.

As you can see, a Texas plan of conversion is only one step in the process of converting your LLC or corporation from one form into another.

A Texas plan of conversion is typically included in the Certificate of Conversion filing. 

Drafting the Plan of Conversion

Attach your plan of conversion to the Certificate of Conversion. The plan of conversion should include the new entity’s name and place of formation and the old entity’s name. It should also include a statement that the LLC is continuing to exist as the corporation or vice versa.

Attach the new entity’s Certificate of Formation to the plan of conversion if a new corporation or LLC has been formed.

Texas law requires any plan of conversion to be approved by a simple majority of members of the existing LLC or by a vote of shareholders of the existing corporation. Your Certificate of Conversion in Texas must include a statement that the plan of conversion has been approved as required by Texas law.

Drafting and Submitting the Certificate of Conversion

Be sure your submission includes either the complete Plan of Conversion or certification that all required information is included. The Secretary of State may delay or reject filings that do not include this confirmation.

The certificate should also be clear that it has been adopted under Texas law. It also should confirm it conforms with the entity’s governing documents’ requirements. 

Once fully prepared, you’ll submit the Certificate of Conversion (including your plan of conversion) to the Texas Secretary of State.

The Texas Secretary of State typically processes Texas conversions within five to seven business days of submission. However, if your conversion is urgent, you should speak with the Secretary of State’s office. Expedited processing may be more appropriate for your situation. 

How Do I Complete a Successful Texas Conversion of my Business Entity?

Speaking with an experienced Texas business lawyer is a great way to get the help you need to convert your business entity.

The Curley Law Firm has helped many business owners like you. We’ve worked to successfully convert Texas businesses from one form to another. Attorney Adam Curley has over 10 years of experience in both business transactions and litigation. Contact us today for a consultation.