Can a single-member LLC be transformed into a corporation with customers as incorporated entities?
3 attorney answers
Don't do that. It won't be worth the securities law compliance costs, tax reporting costs and fiduciary duties to customers. Why does everyone seem to want to share ownership of their companies with others?
I'm confused by what you're asking. You want your LLC to be converted, in order to then be an umbrella corp for all your customers?
An entity is separate and required to be unique; including its own EIN, address, and all sorts of other needs, especially as a corp. Most states don't even have forms for "converting" per se. You would have to incorporate a new entity, and then have it "buy" all the assets/business from the LLC, then you can close the LLC. But your question doesn't provide enough information to discuss whether "converting" is the best option. I would recommend you reach out to a Corporate Lawyer in Texas that can listen to the specifics and decide your best course of action.
Assuming that your LLC is a Texas-organized entity, I would seek out a Texas-licensed corporate lawyer, and share with him/her the operating agreement and a written summary of your company's owners/members, activities, customer base, revenue and profits, assets and liabilities. Depending on whether Texas' LLC and corporation statutes allow for conversion, you would likely need to entertain one of the following options: (1) conversion of the LLC to a domestic corporation; (2) incorporating a new corporation and then conducting an asset sale between the LLC and corporation; or (3) an equity purchase, with the new corporation as the buyer. If Texas does not allow for a direct conversion, an asset sale (with proper transaction instruments drafted by corporate counsel, and cross referenced with a CPA for tax considerations) is likely your most attractive option. As to your customers being their own corporate entities, that is a decision that each of them would need to make, although I suspect most if not all of them are already constituted as LLCs, corporations, or limited partnerships, depending on what type of enterprise in which you are engaged. Everything you do from this point on should be informed by the detailed guidance of a corporate lawyer and CPA who regularly advises corporate entities in the State of Texas. These professionals can safely guide you through the nuances of this transition, once they are properly informed with facts and documents relating to your enterprise. All the best to you in this important step forward.