As companies grow, they may need to change their corporate structure for a variety of reasons. Changing to a new entity type could save money on taxes, enable employees to own shares in the company, or allow the owners to make more decisions.
However, forming a new company can be costly and time-consuming. This is why many business decision makers prefer to convert their existing company to a preferred entity type.
Statutory conversions
There are several ways a business can change its legal structure. The three most common methods are dissolution/formation, inter-entity merger, and statutory conversion. 개인사업자 법인전환
A business owner makes decisions based on current circumstances when choosing the entity type that best suits their company. However, there are times when that initial choice no longer serves the business.
Changing the business structure can allow an entrepreneur to make changes that are better for their business, including flexibility in decision-making and tax savings. In addition, a change in company type can attract new investors or give existing employees more equity shares in the company.
Generally, a corporate or LLC conversion involves drafting a plan of conversion and having its owners approve the proposal. The process varies from state to state, but in general, the owners need to hold a vote and provide their stockholders with the plan for them to approve. The owners must also file a certificate of conversion, as well as formation documents for the newly converted company.
Domestication
As people became more reliant on agriculture, they began domesticating plants and animals that provided them with specific traits. These animals and plants were often bred to produce meat, milk, or fur; or they were selectively bred to help with labors like hunting or carrying loads.
There are two types of domestication: those where an entire species is tamed, such as the elephant or giraffe, and those where a single animal is tamed, such as a house cat. Taming a wild animal can change its behavior, but domesticating an entire species is a genetic change.
In a study by Richard Wrangham of Harvard University, Adam Wilkins of Humboldt University in Germany, and Tecumseh Fitch of the University of Vienna in Austria, they identified what they called the “domestication syndrome.” It’s linked to changes to the embryo’s neural crest cells, which eventually break up and form various tissues in the body, including the adrenal glands—responsible for stress responses—the ears, skin, and teeth.
Liquidation
Liquidation is the process of selling a company’s assets to pay its debts and creditors. This is also called “winding up” or dissolution, and it can be voluntary (where the purpose of the business has been achieved) or compulsory (where the company’s liabilities outweigh its assets).
Liquidations are often used as a last resort for businesses that have exhausted all other options to grow and prosper, such as mergers or acquisitions. Companies may go into liquidation for a variety of reasons including inadequate cash flow, poor operating performance and the exit of shareholders or investors.
A liquidator takes charge of all aspects of the process from collecting, labelling and disposing of the company’s assets to distributing the funds and profits to creditors. This can be a daunting task for directors and management, but it is usually handled by experienced insolvency professionals who will guide them end to end.
Dissolution
As your company grows and evolves, you might find that it has grown beyond the scope of your original articles of incorporation. In this case, you might consider a corporate conversion.
A corporate conversion is a formal way to legally change an entity’s legal status and business type. Typically, this involves filing a new Articles of Dissolution with the Secretary of State in your state. 법인전환
Often, these documents also include a termination statement that defines the parameters of dissolution. In addition, it may contain a plan for the distribution of assets.
When a company is dissolved, it ceases to exist and is taken from the registrar of companies (ROC). It can be voluntary or forced. The main reasons for dissolution include bankruptcy, poor cash flow, and restructuring.