On June 12, 2014, a new law went into effect that simplifies the process for businesses in Washington State to convert to or from a Limited Liability Company (LLC) or a Washington corporation. The law also allows these business entities to change their state of formation or incorporation to or from Washington state, if the other state has a similar entity conversion law. A law allowing conversions to or from Limited Partnerships was already on the books.
Under the new law, the process for converting an LLC or corporation into a new type of business entity involves drafting Articles of Conversion for the existing entity and making an “Origination” filing for the new entity with the Washington Secretary of State’s office. Once the filing is made (and the requisite filing fee is paid), the entity will be considered to exist in its new form.
The only difference for the entity after conversion is its entity form – the converted entity is otherwise treated as the same entity after the conversion. This means that all property remains vested in the entity, and all debts, liabilities, and assets are retained by the converted entity.
To decide whether you need to pay this legislation any attention, a brief review of business entities might be helpful. Business owners in Washington State can choose among twelve (12!) different types of for-profit business entities:
- Sole Proprietorship
- General Partnership
- Limited Partnership
- Limited Liability Partnership
- Professional Limited Liability Partnership
- Massachusetts Business Trust
- Limited Liability Company
- Professional Limited Liability Company
- Personal Service Corporation
- Subchapter C Corporation
- Subchapter S Corporation
- Professional Service Corporation
Washington law also allows the formation of Nonprofit Corporations, Social Purpose Corporations, and Nonprofit Miscellaneous and Mutual Corporations. However, the new entity conversion law does not apply to nonprofit, miscellaneous, and mutual corporations, nor does it apply to governmental or quasi-governmental organizations.
Whether or not a change to your business’s entity form makes sense is going to depend on a number of factors, including federal tax considerations that should be discussed in detail with your accountant. If you are considering converting your business entity, please contact us to discuss the process with you in detail.
For more information about business conversions in Washington State, please see the Secretary of State’s website, the Final Bill Report for SB 5999, and the Session Law, which amends the Washington Limited Liability Company Act and the Washington Business Corporation Act.
Phone: (206) 784-5305
