The Illinois Entity Omnibus Act, which went into effect in 2018, authorizes Illinois corporations and unincorporated entities to convert into other entity forms and to domesticate to another state in a simple one-step transaction. It also allows entities from other states to convert to Illinois entities and domesticate to Illinois.
Below is a brief look at the Entity Omnibus Act. The Act is codified at 805 ILCS 415/101 et seq.
I. Covered entities
The entities covered by the Entity Omnibus Act are:
- Business corporations
- Medical corporations
- Nonprofit corporations
- Professional service corporations
- General partnerships, including limited liability partnerships
- Limited partnerships, including limited liability, limited partnerships, and
- Limited liability companies
II. Conversion
Conversions authorized – Article 2 of the Act authorizes three kinds of conversions:
(1) An Illinois entity can become an Illinois entity of a different type (e.g., an Illinois corporation becoming an Illinois LLC)
(2) An Illinois entity can become a foreign entity of a different type if the conversion is authorized by the foreign jurisdiction (e.g., an Illinois corporation becoming a Delaware LLC, if such a transaction is authorized by Delaware)
(3) A foreign entity can become an Illinois entity of a different type if the conversion is authorized by the foreign jurisdiction (e.g., a Delaware corporation becoming an Illinois LLC if such a transaction is authorized by Delaware)
Plan of conversion – The Illinois entity has to approve a plan of conversion. Any foreign entity involved must follow the requirements of its state of formation in approving the conversion.
Statement of conversion – A statement of conversion, signed on behalf of the converting entity, must be filed with the secretary of state. The statement must include, as an attachment, the text of the converted entity’s formation document (e.g., articles of incorporation for a corporation or articles of organization for an LLC). (Note that the converting entity is the one before the change is made. The converted, the one after the change.)
Effect of conversion – Among other things, when a conversion becomes effective:
(1) The converted entity is the same entity without interruption as the converting entity
(2) All property of the converting entity continues to be vested in the converted entity without assignment, reversion, or impairment
(3) A liability of the converting entity continues as a liability of the converted entity
(4) Except as provided by law or the plan of conversion, all of the converting entity’s rights, privileges, immunities, powers, and purposes remain in the converted entity
III. Domestication
Domestication authorized – Article 3 of the Act provides the following:
(1) An Illinois entity can become an entity of the same type in a foreign jurisdiction if the domestication is authorized by the foreign jurisdiction. (e.g., an Illinois corporation becoming a Delaware corporation if such a transaction is authorized by Delaware)
(2) A foreign entity can become an Illinois entity of the same type if the domestication is authorized by the foreign jurisdiction (e.g., a Delaware corporation becoming an Illinois corporation if such a transaction is authorized by Delaware)
Plan of domestication – The Illinois entity has to approve a plan of domestication. The foreign entity involved must follow the requirements of its state of formation in approving the domestication.
Statement of domestication – A statement of domestication, signed on behalf of the domesticating entity, must be filed with the secretary of state. If the domesticated entity is an Illinois entity, the statement must include, as an attachment, the formation document. (Note that the domesticating entity is the one before the change is made. The domesticated, the one after the change.)
Effect of domestication – Among other things, when a domestication becomes effective:
(1) The domesticated entity is the same entity without interruption as the domesticating entity
(2) All property of the domesticating entity continues to be vested in the domesticated entity without assignment reversion or impairment/p>
(3) A liability of the domesticating entity continues as a liability of the domesticated entity
(4) Except as provided by law or the plan of domestication, all of the domesticating entity’s rights, privileges, immunities, powers, and purposes remain in the domesticated entity.
Owners, managers, legal and other trusted advisers of Illinois entities may wish to familiarize themselves with the Illinois Entity Omnibus Act in case they wish to change entity types or formation states. So too, should those outside of Illinois who might have an interest in converting into or domesticating to an Illinois entity.