There are several logistical factors that need to be considered before a 351 conversion. Making a plan to tackle these issues can help to ensure the process is smooth and allows for the success of the ETF after the conversion is complete.

For a transfer to satisfy the Section 351 requirements, each transferor’s portfolio must have its largest holding represent less than 25% of the total portfolio of that transferor. The ETF must meet IRS diversification standards to ensure no single asset exceeds 25% of the portfolio and that assets exceeding 5% collectively remain under 50%.

It is important to plan and execute a 351 conversion carefully to avoid mistakes. Experienced tax counsel, securities counsel, and a meticulous team are needed. 

An existing LP can easily be converted into an ETF. Non-profits and foundations are always ok. Trusts are typically allowed to contribute as well. Corporations are trickier.