In Indiana, there's a relatively new, simplified procedure that allows conversion from a corporation to an LLC largely by filing a few basic documents with the Secretary of State.
This procedure, technically known as “statutory conversion,
” automatically transfers the corporation’s assets and liabilities to the new LLC.
Unlike other methods of conversion, only one business entity is involved: you do not need to separately form an LLC before the conversion can occur.
And, there's no need to dissolve your corporation.
With Indiana’s conversion statute, the business is considered to be the same entity “without interruption..."
The conversion procedure is codified primarily in Sections 23-1-38.5-10 through 23-1-38.5-16
of the Indiana Code (Ind. Code).
But the Federal tax
implications are the same. You'll have to successfully use Sec. 721 or 351 to transfer assets from one entity to another in exchange for an interest in the new entity with no tax consequence, but the built n gain will still be there IF that flies, and will have to be dealt with when assets are sold.
The way Indiana does this should help insulate.