LLC CONVERSIONS PRIOR TO VC OFFERINGS
For various reasons, many or most venture capital investors still prefer that the entities they invest in be taxed and/or structured as state law C corporations. Many times, start‑up ventures who ultimately seek VC investors are initially organized as limited liability companies. Prior to undertaking VC offerings, these LLCs often seek to "convert" themselves into state law corporations.
This change can be accomplished in Ohio through a "conversion". First, the LLC must enact a written declaration of conversion. This declaration must be approved by the LLC members unless the company is manager-managed. All of the company members, whether voting or non‑voting, are entitled to notice of any meeting of the members to adopt the declaration of conversion. This notice must be accompanied by either a copy or summary of the important provisions of the declaration of conversion. A unanimous vote or action by the members is required to approve the declaration unless the operating agreement specifies a different number or proportion. If and when this approval is obtained, the LLC must file a certificate of conversion with the Ohio Secretary of State's office containing the organizational documents of the converted entity.
Once the above steps are completed, along with the organizational documents of the new corporation, the former LLC can begin to function as a corporation and undertake its venture capital offering.
BACKGROUND OF AUTHOR
Mr. Petrony graduated with a Bachelor of Arts degree, summa cum laude, from Youngstown State University. Subsequently, he obtained a law degree from the Ohio State University College of Law.
Mr. Petrony practices law at The Law Offices of John F. Petrony, LLC in Poland, Ohio. He maintains a transactional practice with a primary emphasis in the fields of business law and real estate law. The business law portion of his practice is comprised, in large part, of the following areas:
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