Plenty of startups begin life as an LLC. Then the company starts to look like a venture-scale startup, and the LLC becomes the wrong container. Investors want preferred stock, employees want options, and founders want the QSBS clock running. All three point the same direction: converting your LLC to a C corporation.
In Delaware, conversion is a well-worn path with a statutory process, predictable fees, and, in most cases, no tax bill. This guide covers why founders convert, the three ways to do it, what it costs, and the tax and QSBS consequences to understand before you file.
Founders convert an LLC to a C corp mainly for venture capital, stock options, and Qualified Small Business Stock (QSBS) benefits.
There are three methods: statutory conversion, statutory merger, and a nonstatutory assets-over transfer. Delaware statutory conversion is the simplest for most companies.
Delaware charges $184 to file a one-page certificate of conversion plus a minimum of $109 for the certificate of incorporation filed with it (fee schedule revised August 1, 2026).
The conversion is generally tax-free under Section 351 if the requirements are met, but liabilities exceeding basis or negative capital accounts can trigger gain.
Your QSBS holding period generally starts at conversion, not at LLC formation, so converting earlier is usually better.
How do you convert an LLC to a C corp?
To convert a Delaware LLC to a C corp, the members approve a plan of conversion, then file a certificate of conversion together with a certificate of incorporation with the Delaware Division of Corporations. Under the fee schedule revised August 1, 2026, the certificate of conversion costs $184 for one page and the certificate of incorporation starts at $109, and Delaware requires a converting Delaware entity to pay its taxes owed (the Delaware LLC annual tax is $400 a year). The conversion is generally tax-free under Section 351 when the members hold at least 80% of the corporation's stock right after the exchange. Figures are as of October 17, 2026.
Delaware LLC or Delaware C-corp for a startup: the short answer
Choose a Delaware C-corp if you plan to raise venture capital or give employees stock options. Choose a Delaware LLC if you are bootstrapping and want profits to pass through to your own tax return.
Investors typically buy preferred stock, and only a corporation issues stock. An LLC fits a small team that expects to fund itself and wants light paperwork. If you are unsure which describes you, the cost of guessing wrong is the conversion this guide covers.
Here is the comparison side by side:
Raising venture capital or granting options? Start as a Delaware C-corp. Bootstrapping and keeping profits? An LLC fits.
Delaware figures come from the Delaware Division of Corporations fee schedule revised August 1, 2026, as of October 17, 2026. The C-corp franchise tax can run higher than the minimum, so check the Delaware franchise tax guide before you pick a method.
Taxes are the part founders trip over. Pass-through avoids a second layer of tax, but it also means owners can owe tax on profits they left in the company. Double taxation is the price of the C-corp structure, and for a company that reinvests everything it earns, it rarely comes up in the early years.
The tradeoff with starting as an LLC:
Conversion can trigger tax. Delaware conversions are generally tax-free under Section 351, but liabilities that exceed basis or negative capital accounts can create gain. Details are in the tax section below.
The QSBS clock generally starts at conversion. The holding period for qualified small business stock (QSBS) generally begins when you become a C-corp, not when you formed the LLC. See QSBS eligibility and talk to a tax professional.
A priced round raises the stakes. A conversion that has to close before a seed or Series A round means a member vote, a plan of conversion, and new governance documents on an investor's timeline.
That is the case for deciding before you file. A C-corp from day one avoids all three, and an LLC is a sound choice when venture funding is not the plan.
Best for founders forming a Delaware C-corp who want their company formed and a business account opened in the same flow, subject to approval: Rho.
We assess formation options on price, what's included, and whether a business account can open in the same flow as formation.
Rho's Delaware C-corp costs $400, and your Rho business account opens in the same flow, subject to approval. To be eligible for the C-corp flow, you need at least one US-based owner or officer, a US operating address, and a business outside Rho's excluded industries. Rho also forms Delaware LLCs for $349 all in, state filing fee included. See how Rho Incorporation works.
Already have an LLC and know you need a C-corp? The rest of this guide covers why founders convert and how to do it.
Why founders convert an LLC to a C corp
Three forces drive nearly every LLC-to-C-corp conversion.
Venture capital requires it. Institutional investors buy preferred stock in Delaware C corporations. Most funds cannot or will not invest in LLCs because pass-through income creates tax headaches for their own limited partners. If you are raising a priced round, expect conversion to be a closing condition. Our guide to the Delaware C corp covers why this structure became the standard.
Stock options need stock. Standard employee equity, including incentive stock options and the tooling around them, is built for corporations. LLC profits interests exist, but they are harder to explain, harder to administer, and unfamiliar to most startup employees.
The QSBS clock. Qualified Small Business Stock under Section 1202 can exclude millions of dollars of gain from federal tax at exit, but only stock in a C corporation qualifies, and only after a multi-year holding period. That holding period does not start while you are an LLC. Every month you wait to convert generally delays when your holding period starts. See our QSBS eligibility guide for the full requirements.
The three ways to convert
1. Statutory conversion (the default for Delaware)
Delaware law lets an LLC convert directly into a Delaware corporation by filing conversion paperwork. The entity continues without interruption, so its contracts, bank accounts, and property stay with the company. Confirm with your tax advisor how the IRS treats your EIN after the conversion. Whether your LLC is a Delaware LLC or an out-of-state one converting into a Delaware corporation, this is almost always the cleanest route.
2. Statutory merger
You form a new C corporation, then merge the LLC into it, with the corporation surviving and members exchanging their LLC interests for stock. This is the classic workaround for states that do not allow statutory conversion. It reaches the same end point but requires a second entity, a merger agreement, and merger certificates, so it means more paperwork and legal review.
3. Assets-over (nonstatutory) transfer
The LLC contributes its assets and liabilities to a newly formed corporation in exchange for stock, then liquidates and distributes the stock to its members. This manual method is usually reserved for unusual situations, such as leaving specific assets or liabilities behind, and creates the most opportunities for error. Do not choose it without counsel.
Delaware statutory conversion, step by step
For a Delaware LLC converting to a Delaware C corporation, the process looks like this:
Approve the conversion. Members approve the plan of conversion per your operating agreement, typically by written consent. Document how LLC units map to shares of stock.
File the certificate of conversion. Delaware's filing fee is $184 for a one-page certificate, plus $9 for each additional page, per the fee schedule revised August 1, 2026.
File the certificate of incorporation simultaneously. Delaware requires it to be filed together with the certificate of conversion. The minimum filing fee is $109, and it rises with your authorized share count. Many startups authorize 10,000,000 shares of common stock at $0.00001 par value.
Adopt corporate governance. Approve bylaws, appoint the initial board, and issue stock certificates or book entries to the former members according to the agreed mapping.
Handle post-conversion housekeeping. Update your registered agent record, notify the IRS of the classification change, update contracts and payroll, and consider 83(b) elections if any founder stock is newly subject to vesting. Deadlines here are unforgiving: an 83(b) election must be filed with the IRS no later than 30 days after the stock is transferred.
If you are up against a financing deadline, Delaware offers expedited processing of a certificate of conversion to a corporation for $100 (24-hour) or $200 (same day).
Tax consequences of converting
An LLC-to-C-corp conversion is generally treated as the members contributing the LLC's assets to a corporation in exchange for stock. Under Section 351 of the tax code, that exchange is tax-free if the people transferring property control at least 80% of the corporation immediately afterward, which is nearly always true in a conversion.
Two exceptions catch founders off guard:
Liabilities exceeding basis. If the LLC's liabilities are greater than the tax basis of its assets, the excess is generally taxed as gain under Section 357(c). This shows up in companies that borrowed heavily or took large depreciation deductions.
Negative capital accounts. Members with negative capital accounts, often the result of distributions or allocated losses exceeding contributions, can recognize gain at conversion.
A lightly capitalized software startup with no debt usually sails through tax-free. A company with loans, real assets, or a complicated distribution history should model the conversion with a tax advisor first. This is general information, not tax advice.
If you are weighing entity taxation more broadly, our C corp vs. S corp comparison explains how the structures differ after you convert.
What conversion means for QSBS
QSBS is often the biggest financial reason to convert, and the timing rules matter:
Your QSBS clock generally starts at conversion. The Section 1202 holding period generally begins when you receive stock in the C corporation, not when you formed the LLC. How much of your gain is excluded depends on when the stock was issued and how long you hold it, so talk to a tax professional.
Pre-conversion appreciation is a double-edged nuance. Any value the business built up during its LLC years is treated as built-in gain that does not qualify for the exclusion if you later sell. But that same built-in value becomes your stock's basis, which raises the ceiling on your exclusion cap, since the cap is the greater of a flat dollar amount or 10 times your basis. In plain terms: LLC-era gain is not excluded, but it can enlarge the shield around your post-conversion gain.
Converting earlier is usually better. The lower the company's value at conversion, the more of your eventual exit qualifies, and the sooner your holding period ends.
The rules changed meaningfully for stock issued after July 4, 2025, including partial exclusions starting at year three. Our QSBS eligibility guide walks through the current requirements.
Timeline and costs
For a typical Delaware statutory conversion:
State fees: $184 (certificate of conversion) plus $109 minimum (certificate of incorporation), plus $9 per extra page, more for higher authorized shares, any taxes owed by the converting Delaware LLC, and any expedited service.
Ongoing costs: As a corporation you will file a Delaware annual report ($50) and pay Delaware franchise tax, which is a minimum of $175 per year under the Authorized Shares Method and $400 under the Assumed Par Value Capital Method, both due on or before March 1.
When to involve a lawyer
For a single-member Delaware LLC with no debt and no outside investors, conversion is close to mechanical. For anything else, bring in counsel: multiple members with different economics, profits interests or convertible instruments outstanding, meaningful liabilities, an out-of-state LLC, or a conversion tied to a financing. The legal fees are small next to the cost of a botched cap table or a surprise tax bill.
Starting fresh instead? Skip the conversion entirely
If you have not formed your entity yet and you know you are building a venture-scale company, the simplest move is to start as a Delaware C corp and never convert. Your QSBS holding period generally starts when your founder stock is issued, so there is no conversion to plan around.
Best for founders forming a Delaware C-corp who want their company formed and a business account opened in the same flow, subject to approval: Rho. We assess formation options on price, what's included, and whether a business account can open in the same flow as formation.
When you incorporate a Delaware C-corp with Rho, it costs $400: every formation document is reviewed by a licensed attorney, registered agent service is covered for your first year, your EIN application is filed for you, and 83(b) election support is included. C-corp filings take about 24 hours, starting the next business day after you submit, and your Rho business account opens in the same flow, subject to approval. To be eligible for the C-corp flow, you need at least one US-based owner or officer, a US operating address, and a business outside Rho's excluded industries. Rho also forms Delaware LLCs for $349 all in, state filing fee included. See how Rho Incorporation works.