I have formed a LLC in just my name now I want to change it a corporation and add two partners. Do I leave it as an LLC? Which one protects me from liability the best?


Why would you want to change a limited liability company (LLC) to a corporation? You would have to form a new entity, the corporation, transfer LLC assets or interests to the corporation and perhaps dissolve the LLC. Why? If you simply are trying to bring in two more equity holders (called "members" not "partners" or "shareholders" in an LLC) they can simply join your existing LLC. You need to address contributions (what will they invest), tax consequences (ask your CPA if Code Section 721 will make their contributions tax free), and you must have an operating agreement governing the terms of your relationship.

As far as liability protection, the key is observing all the formalities of the entity. So be sure to consult with a corporate/business attorney annually or more frequently on the operations of the LLC and have a CPA assist in tax compliance. If asset protection (protection from lawsuits) is a concern, you should also consult an estate planner that specializes in asset protection.

For some good basic background on LLCs, you should get Shenkman, "Starting Your Own Limited Liability Company" available through

From the sound of your question you really need to get a corporate/business lawyer in your area to help you. Don't try this alone. The tax, legal and other problems you can create for yourself will far outweigh whatever legal fees you can save.

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