How to Convert an LLC to a C Corp in California

To convert an LLC to a C corp in California, you file a statutory conversion with the California Secretary of State under the Corporations Code. The filing swaps the entity’s legal form without dissolving the LLC or creating a new company from scratch, so contracts, tax identification history, and legal standing carry over. The base state fee is $150. The real work sits on either side of that filing: drafting the plan, getting member approval, and coordinating federal and state tax treatment so the change doesn’t trigger an avoidable tax bill.

Draft a Plan of Conversion

Every statutory conversion starts with a written plan. California law requires it to spell out the terms and conditions of the conversion, the name of the new corporation and where it will be organized, and how each member’s LLC interest translates into shares of corporate stock.¹ That share-exchange piece matters more than people expect. If one member holds a 40% interest with special distribution preferences, the plan needs to describe exactly what class and number of shares that member receives.

The plan must also include the new corporation’s governing documents, at minimum the Articles of Incorporation.¹ Most converting LLCs prepare draft bylaws at this stage too, since the board adopts them at the organizational meeting shortly after the conversion takes effect. Getting the capital structure right in these documents is where most of the legal work happens, especially if you plan to issue stock options or create preferred shares for future investors.

Secure Member Approval

The plan needs formal approval from the LLC’s members. The statement of conversion filed with the state must confirm that members voted to approve the plan’s principal terms and must specify each class of interest entitled to vote along with the percentage that voted in favor.² A majority vote is the standard threshold, though your operating agreement may set a different requirement.

The filing itself must be signed by all members of a member-managed LLC or all managers of a manager-managed LLC, unless the operating agreement or articles of organization allow fewer signatures.² Execution is separate from the vote. Even after a majority approves, every member or manager still signs unless the governing documents say otherwise.

Members who vote against the conversion have dissenters’ rights. When the conversion takes effect, a dissenting member can demand the fair value of their LLC interest instead of accepting shares in the new corporation.¹ If any member is likely to object, budget for an independent valuation before the vote. Disagreements over fair value can stall the conversion or lead to costly buyout negotiations.

File With the California Secretary of State

After members approve the plan, you file Articles of Incorporation containing a Statement of Conversion. The Secretary of State provides a specific form for this: Form CONV LLC-GS for a California LLC converting to a general stock corporation.³ The single filing creates the new corporation and cancels the LLC. No separate dissolution is required.²

The base filing fee is $150.³ You can file online through bizfileOnline.sos.ca.gov, by mail, or in person in Sacramento. Expedited processing is available for additional fees on top of the $150:

24-hour processing (Class C): $350, online or drop-off
Same-day processing (Class B): $750, online or drop-off, must be received by 9:30 a.m.
4-hour processing (Class A): $500, Sacramento drop-off only, requires preclearance

A same-day conversion filing therefore runs $900 total.⁴ After the conversion goes through, the new corporation must file a Statement of Information (Form SI-200) with the Secretary of State within 90 days of the filing date.

Coordinate Federal Tax Classification

The state filing changes the entity’s legal form. You still need to address how the IRS classifies you. An LLC currently taxed as a partnership or disregarded entity can file IRS Form 8832 (Entity Classification Election) to elect C corporation treatment for federal purposes.⁵ The IRS recognizes state-law statutory conversions as effective for federal purposes under Revenue Ruling 2004-59, but filing Form 8832 gives you a clean paper trail and lets you control the effective date of the tax classification change.

Form 8832 also helps preserve your Employer Identification Number. The IRS says a new EIN is required when you “terminate an existing LLC and form a new corporation” but not when you “change your tax election to a corporation.”⁶ A statutory conversion sits between those two scenarios, so filing Form 8832 before the conversion effective date frames the change as an election rather than a termination-and-reformation. Single-member LLCs that file excise or employment taxes will need a new EIN regardless.⁷

File a Final LLC Tax Return

The LLC files a final federal return covering the period from the start of its tax year through the conversion’s effective date. Multi-member LLCs file a final Form 1065 (U.S. Return of Partnership Income) with the “Final return” box checked.⁸ Single-member LLCs report their final period on Schedule C. The new C corporation begins its first corporate tax year on the day after the effective date.

Qualify for Tax-Free Treatment Under Section 351

This is where the conversion either costs nothing in taxes or triggers a potentially large bill. Under Section 351 of the Internal Revenue Code, no gain or loss is recognized when property is transferred to a corporation in exchange for stock, as long as the transferors control at least 80% of the corporation immediately after the exchange.⁹ In a straight conversion where every LLC member becomes a shareholder, the 80% test is easy to meet since the former members collectively own 100% of the new corporation.

The test gets tighter when some members dissent and cash out rather than accepting stock, or when outside investors receive shares as part of the conversion. If the converting members end up with less than 80% of the total combined voting power and 80% of all other classes of stock, the entire exchange becomes taxable.¹⁰ Get a valuation of the LLC’s assets before the conversion, both to establish the tax basis for the newly issued shares and to support the Section 351 position if the IRS later asks questions.

Handle California Tax Obligations

The Franchise Tax Board needs to know about the entity change. Once the conversion is effective, the new C corporation files California Form 100 instead of LLC returns, and the FTB assigns a corporate filing number once it receives a payment or return.¹¹

California taxes C corporation net income at 8.84%.¹² The state also imposes an $800 annual minimum franchise tax, but newly incorporated or qualified corporations are exempt from the minimum in their first taxable year.¹³ Any net income earned in that first year is still taxed at 8.84%. Starting in the second taxable year, the $800 minimum kicks in even if the corporation has no income.¹⁴

One limit worth knowing: the first-year exemption does not apply to corporations that reorganize solely to avoid the minimum franchise tax.¹³ A genuine conversion done for business reasons like raising venture capital clears that bar.

Set Up Corporate Governance

Once the Secretary of State processes the filing, you have a corporation on paper but not yet a functioning one. The newly elected board holds an organizational meeting to adopt bylaws, appoint officers, and pass resolutions authorizing basic operations such as opening bank accounts and establishing signing authority for contracts.

Former LLC members receive stock certificates in exchange for their membership interests on the terms in the plan of conversion. The corporation should maintain a stock ledger recording every shareholder, the number and class of shares held, and any transfer restrictions. If you plan to issue stock options to employees, the board should adopt an equity incentive plan at or shortly after the organizational meeting.

Update business records and accounts to reflect the new corporate name and structure: bank accounts, real property deeds, vehicle titles, leases, vendor contracts, and insurance policies. Maintain a minute book as the permanent record of board and shareholder meetings, resolutions, and corporate actions. Keeping these records current is how you preserve the liability shield.

Protect QSBS and Section 1244 at Issuance

Converting to a C corporation unlocks two federal tax benefits that don’t exist for LLCs, and both depend on getting the details right at the moment of conversion.

Qualified Small Business Stock (Section 1202)

Section 1202 lets non-corporate shareholders exclude some or all of the capital gain when they sell stock in a qualified small business.¹⁵ For stock issued after July 4, 2025, the One Big Beautiful Bill Act created a tiered exclusion: 50% of gain if held at least three years, 75% if held at least four years, and 100% if held five years or more.

To qualify, the corporation’s gross assets cannot exceed $75 million at or before the time the stock is issued, at least 80% of the corporation’s assets must be used in an active qualified trade or business during substantially all of the holding period, and the stock must be acquired at original issuance in exchange for money, property, or services. Certain service businesses are excluded, including health, law, engineering, accounting, consulting, financial services, and performing arts. The maximum excludable gain per taxpayer per issuer is the greater of $15 million (indexed for inflation starting in 2027) or ten times your adjusted basis in that issuer’s stock.

The conversion itself can qualify as an original issuance if structured under Section 351. Members who receive stock directly from the corporation in exchange for their LLC interests meet the original-issuance requirement, and the holding period typically starts on the conversion date.

Section 1244 Ordinary Loss Treatment

Section 1244 lets individual shareholders deduct losses on qualifying small business stock as ordinary losses rather than capital losses. Capital losses only offset capital gains plus $3,000 of ordinary income per year, so the ordinary-loss treatment is meaningful insurance if the business fails.¹⁶

The stock qualifies if the corporation received no more than $1 million in total money and property for all of its stock (including paid-in surplus and contributed capital) at the time the Section 1244 stock was issued. It must be common stock issued in exchange for money or property, not services. Individual shareholders can deduct up to $50,000 per year in ordinary losses, or $100,000 for married couples filing jointly.¹⁶ The board should adopt a Section 1244 plan as part of the organizational meeting to document that the stock qualifies.

File Securities Notices for the Stock Issuance

Issuing stock, even to your own former LLC members, is a securities transaction subject to federal and state law. Most conversions rely on an exemption from registration rather than registering the shares, but you still need to identify and comply with the applicable exemption.

If you use a Regulation D exemption at the federal level, file a Form D notice with the SEC within 15 calendar days of the first sale of securities. The filing is made electronically through EDGAR at no charge. Missing the deadline doesn’t void the exemption for offerings under Rule 504 or Rule 506, but the SEC expects a good-faith effort to file as soon as practicable.¹⁷ California has its own securities exemptions under the Corporations Code that may also require a filing or notice. If outside investors are participating in the conversion, or you plan a fundraising round shortly after, securities compliance becomes substantially more complex and warrants professional guidance.

1
California Legislative Information. California Corporations Code 17710.03
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California Legislative Information. California Corporations Code CORP 17710.06
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California Secretary of State. Conversion Information
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California Secretary of State. Service Options
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Internal Revenue Service. LLC Filing as a Corporation or Partnership
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Internal Revenue Service. When to Get a New EIN
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Internal Revenue Service. Publication 5845 – Do You Need a New EIN?
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Internal Revenue Service. IRS Form 1065 – U.S. Return of Partnership Income
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Office of the Law Revision Counsel. 26 U.S. Code 351 – Transfer to Corporation Controlled by Transferor
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Internal Revenue Service. Rev. Rul. 2003-51
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Franchise Tax Board. LLC Treated as a Corporation
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Franchise Tax Board. Business Tax Rates
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California Legislative Information. California Revenue and Taxation Code 23153
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Franchise Tax Board. C Corporations
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Office of the Law Revision Counsel. 26 USC 1202 – Partial Exclusion for Gain From Certain Small Business Stock
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Office of the Law Revision Counsel. 26 USC 1244 – Losses on Small Business Stock
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U.S. Securities and Exchange Commission. Frequently Asked Questions and Answers on Form D