In a previous post, we discussed the importance of choosing the right type of entity for your new or growing business. From shielding assets, to determining control of the business, to tax issues, many factors go into deciding which corporate form is right for your business. Many similar issues are considered when choosing whether your entity will be incorporated in Mississippi or another state, such as Delaware.
However, as any business owner knows, the one constant in business is change, and there may come a time when changes to your circumstances may warrant considering a change in either your entity or state of incorporation.
Reasons for Changing Corporate Structure or Domicile
Known as “conversion,” changing from one corporate form to another may be advantageous or necessary for a number of reasons, including:
- You no longer need to issue stock
- You are seeking venture capital
- You want to take advantage of specific tax benefits or avoid specific liabilities
- You want to have different management requirements for your company
Similarly, a decision to change your LLC’s or corporation’s state of incorporation from one state to another (known as “domestication”) may be driven by:
- Favorable state corporate and/or personal tax treatment
- Predictable and well-developed corporate law
- Laws favorable to directors and officers in terms of duties and liabilities
- Burden or ease of maintaining corporate formalities
New Mississippi Law Makes Conversion and Domestication Easier
On January 1, 2015, a new Mississippi law will come into effect that is designed to make it easier for businesses to change their entity form and their state of incorporation. The “Mississippi Entity Conversion and Domestication Act” (§79-37-102 et seq. Mississippi Code 1972 as amended) signed into law in March 2014, removes many of the cumbersome steps that currently make it burdensome to make these changes. Under the new law, a plan of conversion must be approved by interest holders in the pre-existing entity and it must describe the conversion and its effect in detail. The plan is required to include:
- the name and type of the current entity;
- the name, jurisdiction of organization, and type of the new converted entity;
- the manner for converting the interests in the pre-existing entity;
- the proposed public organic document of the new converted entity if it will be a filing entity;
- and the private organic rules of the converted entity.
After approval of the plan by the interest holders, a statement of conversion must be filed with the Mississippi Secretary of State’s Office.
In order for foreign entities to become Mississippi entities, all they must do when the law takes effect is file a simple document with the Secretary of State.
If you are considering changing your business entity form or state of incorporation, or have questions as to how and why to do so, please give the experienced Mississippi business lawyers at Rushing & Guice a call.
Rushing & Guice, P.L.L.C: Mississippi and Gulf Coast Business Lawyers
At Rushing & Guice, experienced business counsel is a phone call away. Call us at (228) 374-2313 or fill out our online form to arrange for a free, limited initial consultation. We look forward to hearing from you, and look forward to the opportunity to serve as your attorneys.
This website has been prepared by Rushing & Guice, P.L.L.C. for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction