Nonstatutory conversion is the process of changing a business entity's legal structure, typically from one type to another, outside the framework of specific statutory provisions, often done for tax or operational reasons.
Starts at $0 + state fees and only takes 5-10 minutes
Last Updated: January 9, 2026
The limited liability company (LLC) and the corporation are both formal business entities with plenty of their own advantages and disadvantages.
When someone first starts a business, the LLC structure or corporate structure might seem like the right fit. Later on, after the business has grown, the owners might realize that the other structure would be a better fit.
Thankfully, it’s possible for entrepreneurs to convert their LLC into a corporation (or vice versa). There are two main ways to accomplish this: a statutory merger or a statutory conversion. But there’s also a third option that’s rarely used anymore, which is the nonstatutory conversion. What is the nonstatutory conversion, and why is it so unpopular these days?
This article will explain all the relevant details of the nonstatutory conversion and its more popular alternatives.
A nonstatutory conversion is an antiquated method for converting one business entity type to another — for example, changing an LLC to a corporation, or vice versa. The nonstatutory conversion starts with forming an entirely new business entity, followed by a vote to approve a merger between the existing entity and the new one.
Then, the business owners voluntarily and formally trade in their ownership of the previous entity for ownership shares in the new one. The owners also draft and file a document (usually called the Certificate of Merger) with the Secretary of State to officially merge the two companies.
The business owners will also need to transfer the assets of the original business entity to the new one once it’s formed and dissolve their original entity. Ultimately, the nonstatutory conversion is unpopular because it’s complicated, requiring original documents for every step of the process. Completing the process correctly often requires a business to hire an attorney. Thankfully, the nonstatutory conversion is largely unnecessary today because there are two other (much simpler) methods for converting a business entity.
The statutory conversion is the simplest way to convert a business from one entity type to another. Statutory conversions were introduced into the American business world fairly recently, and as such, they aren’t available in every single state (read the statutory conversion definition guide to learn more).
This process has some variance from state to state, but in general, it starts with the company’s ownership group agreeing to convert the business entity type and drafting a conversion plan. Then, those owners need to hold a vote to approve the conversion. In a corporation, company leadership needs to provide the company’s stockholders with the plan so they can vote on it, while in an LLC, a simple majority of the company’s owners can approve the plan.
The next step is to draft and file the certificate of conversion. The exact information needed to complete the certificate of conversion can vary depending on the state where the conversion happens, but generally speaking, the Secretary of State needs the following information:
The company will also need to prepare and file the formation documents for the business entity it wishes to convert to — the articles of organization for an LLC, or the articles of incorporation for a corporation. Finally, the original company will need to dissolve to complete the statutory conversion process formally.
Recommended: Conversion Definition and How to Change an LLC to an S Corp
The statutory merger is no longer the most popular method for converting one type of business to another, but it is still used frequently in a handful of states. The statutory merger starts with the formation of a brand-new business entity, followed by a vote to approve a merger between the existing entity and the new one.
Then, the business owners will need to voluntarily and formally trade in their ownership in the previous entity for ownership shares in the new entity. Finally, the company owners will need to draft and file a document (usually called a certificate of merger) with the Secretary of State to officially merge the two companies.
All told, the statutory merger is quite similar to the nonstatutory conversion, but the big difference is that with a statutory merger, these transfers are relatively seamless and automatic. In a nonstatutory conversion, it’s necessary to draft separate agreement documents to complete each step (read more on the statutory merger definition).
Mergers and conversions are complicated, and lots of business owners don’t want to deal with that kind of hassle. Thankfully, they have options. Business owners can hire a business attorney to convert their business entity, although this is an extremely expensive route that could see their expenses quickly climb into the thousands of dollars.
Another option is to hire a business services company. While there aren’t nearly as many options as there are for forming an LLC, there are still several reputable companies offering business conversion services. Take a look at a few popular options:
The nonstatutory conversion is hardly ever used these days, as it has been replaced by the statutory conversion and, to a lesser extent, the statutory merger. This is fortunate, as the nonstatutory conversion is easily the most complicated of these three methods. Business owners who want to convert their entities can hire business formation services to handle this process on their behalf.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.
Written by ZenBusiness Editorial Team
The ZenBusiness Editorial Team has more than 20 years of combined small business publishing experience and has helped over 850,000 entrepreneurs launch and grow their companies. The team’s writers and business formation experts are dedicated to providing accurate, practical, and trustworthy guidance so business owners can make confident decisions.
Ready to Start Your Business?
Start Your LLC