With the increase of LLC formation of the past few years, current small and family-owned corporation owners may be asking themselves… Did I miss out on something? The classic attorney answer is, in short, it depends. The point of the post is to mention 2 key reasons to consider making the conversion. What the post will not touch on is the wide-ranging benefits of forming a Limited Liability Company as your first step in starting your business. Nor will it discuss the IMPORTANCE of seeing an attorney prior to setting up any business entity.
Corporation owners may consider converting to an LLC for the “pick your partner provisions” and “charging order provisions.” Pick your partner provisions deal with partner compatibility by limiting and restricting transfer rights of members. In other words, your operating agreement (like a corporation’s bylaws), can prevent members from transferring their management rights to, for example, your enemy or worse, the victor in a bankruptcy proceeding. “Charging Order” provisions or judgment creditor provisions alter creditor rights with regard to distributions to members.
These are very important provisions that should be discussed with an Attorney
Thank you John Cunningham, JD for the valuable insight provided at #p4g12, #wealthcounsel symposium.
Please call for a complementary consultation to discuss corporation conversion or LLC formation.
Attorney Shayna Borakove