A Merger is the combining of two or more companies into one company. The Merged companies are completely absorbed into and become part of the company into which they are Merged..
All states have laws that govern Mergers of companies.
Most states have one set of Merger laws for corporations and another set of Merger laws for Limited Liability Companies (LLC).
A Corporation can be Merged into a LLC or a LLC can be Merged into a Corporation.
In these cases parts of the Merger laws for Corporations and the Merger laws for LLCs would apply.
Mergers can also involve General Partnerships (GP), Limited Partnerships (LP) or Limited Liability Partnerships (LLP).
One of the first things that needs to be done for a Merger to happen is that the people responsible for making business decisions, for example the Board of Directors of a Corporation, must approve a resolution to adopt a formal Plan of Merger.
Next the shareholders of a Corporation, members of a LLC, or partners of a GP, LP or LLP, must approve the formal Plan of Merger.
The Plan of Merger includes a description of the specific details of the proposed Merger.
The Plan of Merger may include any legal provision to which the Merging companies agree.
This includes, among other things, a description of how ownership interest will be transferred.
For Corporations this is a description of exactly how any outstanding shares of stock will be converted or transferred.
Once a final Plan of Merger is approved by the majority of the shareholders, members or partners, documents have to be filed with the state agency responsible for administering the business services program in the state of the newly Merged company. This is usually the Secretary of State. Some states require that the formal Plan of Merger be filed along with the request for approval of the Merger. After the Merger is approved, the Secretary of State will then issue documents which legally recognize the newly Merged company.
Mergers, especially those that involve business entities from different states, can be complex and may expose the owners - shareholders, members or partners - to varying degrees of tax liability.