To change an LLC to a partnership, you file a statutory conversion with your state (or dissolve the LLC and form a new partnership where statutory conversion isn’t available), adopt a written partnership agreement, and update the IRS, your bank, licenses, and contracts to reflect the new entity. Before you start any of that, confirm the change is one you actually need. A multi-member LLC is already taxed as a partnership by default, so if the goal is partnership tax treatment, you already have it.1Internal Revenue Service. LLC Filing as a Corporation or Partnership
First, Confirm You Need to Convert
A multi-member LLC that has not filed Form 8832 electing corporate treatment is already classified as a partnership for federal income tax purposes.1Internal Revenue Service. LLC Filing as a Corporation or Partnership It files Form 1065, issues Schedule K-1s, and passes income through to members’ personal returns. If pass-through partnership taxation is your only reason for wanting the change, you don’t need to do anything.
Reasons that do justify a real conversion tend to be non-tax. Some owners want simpler governance than an LLC operating agreement provides. Some professions or industries expect a partnership structure. In certain states, LLC franchise taxes or annual fees are meaningfully higher than what partnerships pay. And sometimes the operating agreement has become unworkable and starting over with a partnership agreement is cleaner than amending.
What You Give Up
The biggest cost is liability protection. An LLC shields its members from personal responsibility for business debts in much the way a corporation shields shareholders.1Internal Revenue Service. LLC Filing as a Corporation or Partnership A general partnership offers no such shield. Every general partner is personally liable for the partnership’s debts and obligations, and for the business acts of the other partners. If the business gets sued or defaults on a loan, personal assets are exposed.
If that trade-off bothers you, a limited partnership or a limited liability partnership can preserve some protection, though availability and rules differ by state and profession. If you convert to a general partnership anyway, commercial liability coverage becomes much more important than it was under the LLC.
You also lose tax-classification flexibility. An LLC can elect to be taxed as a C corporation or an S corporation by filing Form 8832 or Form 2553.1Internal Revenue Service. LLC Filing as a Corporation or Partnership A general partnership cannot. Only entities classified as corporations qualify for S corporation status.2Internal Revenue Service. S Corporations After conversion, pass-through taxation as a partnership is your only option unless you reorganize again later.
Two Ways to Convert
Most states offer a statutory conversion procedure. You file conversion paperwork, the state records the change, and the business continues as the same legal entity under a new structure. Contracts, assets, and liabilities carry over automatically because nothing has technically been transferred.
Where statutory conversion isn’t available, or the state doesn’t allow it between these particular entity types, the fallback is to dissolve the LLC and form a new partnership. This is more expensive and more work. You wind up the LLC, file articles of dissolution, transfer every contract and asset over to the new partnership, and re-register licenses and permits. Some assets, like intellectual property licenses or customer contracts, may need third-party consent to transfer. Check your Secretary of State’s website, or ask an attorney, to confirm which path your state allows.
Before You File
Get Member Approval
Read the LLC’s operating agreement first. It usually specifies what vote is required for a structural change: simple majority, supermajority, or unanimous consent. If the agreement is silent, state default rules apply.
Members who vote against the conversion may have dissenter’s rights (sometimes called appraisal rights) in some states. Those rights let a dissenting member demand fair value for their interest rather than be forced into the new entity. Not every state provides this for LLCs, and some have narrowed it in recent years. If any member opposes the change, research your state’s rules before the vote.
Draft the Partnership Agreement
The partnership agreement replaces the operating agreement and governs the new entity. At a minimum it should cover:
- Capital contributions from each partner and whether future contributions can be required
- How profits and losses are allocated, including any split that differs from ownership percentages
- Management and decision-making, including which decisions require a partner vote and at what threshold
- Partner withdrawal and admission, including how buyouts are valued
- Dispute resolution, whether by mediation, arbitration, or court
- Dissolution triggers and how assets are distributed at wind-up
Don’t rely on a handshake. Where a written agreement is silent, state default rules fill in, and those defaults may not match what the partners actually want.
Prepare a Plan of Conversion
States that allow statutory conversion often require a formal plan of conversion with the filing. It typically identifies the current LLC, the entity type it’s converting into, how ownership interests carry over, and the effective date. Some states require every member or an authorized representative to sign. Gather this information before you start on state forms.
Filing with the State
The filing itself is usually the easy part. You submit a Certificate of Conversion, Articles of Conversion, or a form of similar name to the Secretary of State or equivalent agency. It generally asks for the LLC’s current name, the new partnership’s name, the effective date, the registered agent, and the names of the partners.
Filing fees generally run from about $30 to $200, though some states charge more. Most states accept online filings. Processing runs from same-day to several weeks depending on the state and workload. Where expedited handling is offered, it can add roughly $25 to $750 depending on turnaround.
Once the state approves the filing, the conversion is effective on the date shown on the certificate. In a statutory conversion, the partnership is legally the same entity as the former LLC, so existing contracts and obligations continue. In a dissolution-and-reformation, you separately file articles of dissolution for the LLC and a certificate of partnership or statement of partnership authority for the new entity.
Tax Consequences and the EIN Question
If the LLC was already taxed as a partnership (the default for a multi-member LLC), converting to an actual partnership generally does not change federal tax classification. The IRS does not treat the conversion itself as a taxable event, because the entity remains a pass-through filing Form 1065.1Internal Revenue Service. LLC Filing as a Corporation or Partnership
If the LLC had previously elected to be taxed as a corporation, the conversion does change classification, and the IRS treats that as a deemed liquidation of the corporation followed by a contribution of assets to the partnership. That can trigger taxable gains depending on the entity’s assets and liabilities. An election on Form 8832 to change classification cannot take effect more than 75 days before the form is filed or more than 12 months after it is filed.3Internal Revenue Service. Form 8832, Entity Classification Election If this describes your situation, work with a tax professional.
On the EIN, the IRS says you do not need a new one when you convert a partnership into an LLC classified as a partnership. The reverse follows the same logic when tax classification doesn’t change. You do need a new EIN if you terminate the LLC and form a new partnership as a separate entity rather than using statutory conversion.4Internal Revenue Service. When to Get a New EIN You also need a new EIN if a single-member LLC (treated by the IRS as a disregarded entity or sole proprietorship) adds partners and becomes a multi-member partnership, because that shifts the classification from sole proprietorship to partnership.5Internal Revenue Service. Publication 5845 – Do You Need a New EIN Applying for an EIN is free and takes a few minutes on the IRS website, so erring toward caution costs little.
After the State Approves the Change
Notify your bank. Update the business account to reflect the new entity name and structure. Banks will usually want a copy of the partnership agreement and the filed certificate of conversion, and some will require closing the old account and opening a new one, especially if the EIN changed.
Update licenses and permits. These generally don’t transfer automatically. Some are amended, some reissued, and some require a fresh application. Professional licenses, health permits, and industry-specific certifications are the most likely to need individual attention.
Review every contract. In a statutory conversion the partnership legally steps into the LLC’s shoes, so contracts remain enforceable, but many contracts contain change-of-control or assignment clauses that require notice to, or consent from, the other party when the entity structure changes. Missing that step could give the counterparty grounds to terminate. Work through vendor agreements, leases, loan documents, and client contracts one at a time.
Update your website, invoices, letterhead, and public-facing materials to the partnership’s name, and file any fictitious-name or “doing business as” registration your state requires for the partnership. Then revisit your insurance. The old policy was written for an LLC; the new structure, and the loss of the liability shield, may call for different or additional coverage.