Many clients have sought to convert their closely held corporations to LLC's lately, and with good reason. Very few small business owners actually do anything with their corporations that couldn't also be done under an LLC. And let's face it: very few closely held corporations do an adequate job of keeping up with corporate formalities. In the event of a lawsuit, this can result in "veil piercing" which, as we have discussed here previously, is much harder to do to an LLC.
So for this reason alone -- simpler management, fewer formalities, and less risk of a court overlooking the corporate entity to reach the assets of business owners -- many clients are choosing wisely to convert to an LLC.
While this seems like just a simple bit of paperwork (you can download Articles of Conversion from the secretary of state's website, after all) there can be a few catches. There are also other methods for accomplishing the same result, without using the state conversion form. A careful review of the tax implications involved should be undertaken prior to making a final decision on conversion. For one, the conversion could trigger a taxable gain. For another, there could be an effect on employment tax wage bases. These effects could, of course, be quite sizable, and result in the need for additional planning, or foregoing conversion altogether.