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.

No, it is not possible to exchange securities for shares in an existing ETF that is already trading. There is just one opportunity before the ETF launches to participate in a 351 conversion of assets.