1.0Arizona LLC Lawhttps://www.keytlaw.com/azllclawRichard Keythttps://www.keytlaw.com/azllclaw/author/1llclawyer/rich600338<blockquote class="wp-embedded-content" data-secret="o5e2HuDS9Y"><a href="https://www.keytlaw.com/azllclaw/2016/11/tax-free-merger/">Tax Free Merger of a Corporation into an LLC</a></blockquote><iframe sandbox="allow-scripts" security="restricted" src="https://www.keytlaw.com/azllclaw/2016/11/tax-free-merger/embed/#?secret=o5e2HuDS9Y" width="600" height="338" title="“Tax Free Merger of a Corporation into an LLC” — Arizona LLC Law" data-secret="o5e2HuDS9Y" frameborder="0" marginwidth="0" marginheight="0" scrolling="no" class="wp-embedded-content"></iframe><script type="text/javascript"> /* <![CDATA[ */ /*! This file is auto-generated */ !function(d,l){"use strict";l.querySelector&&d.addEventListener&&"undefined"!=typeof URL&&(d.wp=d.wp||{},d.wp.receiveEmbedMessage||(d.wp.receiveEmbedMessage=function(e){var t=e.data;if((t||t.secret||t.message||t.value)&&!/[^a-zA-Z0-9]/.test(t.secret)){for(var s,r,n,a=l.querySelectorAll('iframe[data-secret="'+t.secret+'"]'),o=l.querySelectorAll('blockquote[data-secret="'+t.secret+'"]'),c=new RegExp("^https?:$","i"),i=0;i<o.length;i++)o[i].style.display="none";for(i=0;i<a.length;i++)s=a[i],e.source===s.contentWindow&&(s.removeAttribute("style"),"height"===t.message?(1e3<(r=parseInt(t.value,10))?r=1e3:~~r<200&&(r=200),s.height=r):"link"===t.message&&(r=new URL(s.getAttribute("src")),n=new URL(t.value),c.test(n.protocol))&&n.host===r.host&&l.activeElement===s&&(d.top.location.href=t.value))}},d.addEventListener("message",d.wp.receiveEmbedMessage,!1),l.addEventListener("DOMContentLoaded",function(){for(var e,t,s=l.querySelectorAll("iframe.wp-embedded-content"),r=0;r<s.length;r++)(t=(e=s[r]).getAttribute("data-secret"))||(t=Math.random().toString(36).substring(2,12),e.src+="#?secret="+t,e.setAttribute("data-secret",t)),e.contentWindow.postMessage({message:"ready",secret:t},"*")},!1)))}(window,document); //# sourceURL=https://www.keytlaw.com/azllclaw/wp-includes/js/wp-embed.min.js /* ]]> */ </script> Question:  How do I convert my corporation into a limited liability company? Answer: Two ways – the easy way and the hard, but not too hard way. Easy Way:  If your corporation does not have assets that have substantial value or contracts that cannot be assigned or transferred to the LLC without the consent of the other party to the contract then simply form a new LLC, dissolve the corporation and start doing business under the new LLC.  If your corporation is an Arizona corporation and you dissolve it before or concurrently with forming your Arizona LLC the new LLC’s name can be identical to the corporation’s name. Harder Way:  Form an Arizona LLC and merge the corporation into the LLC.  The advantage of this method is that a merger causes the assets and liabilities of the corporation to become assets and liabilities of the LLC automatically as of the effective date of the merger.  If the dissolution of the corporation would cause its shareholders to pay unwanted income taxes the merger method may avoid the tax. Example 1:  World Wide Widgets, Inc. owns property that has a value of $101,000.  The sole shareholder’s basis in his stock of the corporation is $1,000.  If the corporation assigned the property to its shareholder before dissolving the shareholder would have taxable gain of $100,000 ($101,000 value of property – $1,000 adjusted basis of the stock). If the stock is a capital asset (held for more than one year) the shareholder in this case could be paying as much as 23.8% of the gain as federal income tax plus state income tax if the shareholder resides in a state that has a state income tax.  Arizona’s tax rate [...]