Your sole proprietorship can very easily be converted into an LLC. In all US states you are allowed to form an LLC, all you need to do is to stop conducting business under the name of your sole proprietorship, and before doing any more business, file for an LLC with the Secretary of State of the state you want to conduct business in. Converting your sole proprietorship to an LLC is crucial when you want your business to grow and earn a profit. As an LLC, your business will be able to grow and take on more risk than you acting as a sole proprietor can and when you are ready to make the switch, it is important to make sure you entirely dissolve your sole proprietorship before filing for your LLC. That means you withdraw your “doing business as” name (DBA) if you had one filed, you stop using your business bank accounts and you cancel all licences and permits associated with your sole proprietorship. Then only are you allowed to file for your LLC in the state of your choice, this is especially crucial if you are going to be using the same name as your now dissolved sole proprietorship. Converting your sole proprietorship to an LLC is simply filing for a new LLC, which is easily done if you can follow a few steps. There are however a few things you need to keep in mind while filing for your LLC if you successfully want to convert your sole proprietorship into an LLC.
The steps to filing for your LLC
When converting your sole proprietorship into an LLC, the first you take is selecting a name for your LLC. If you want to use the name of your sole proprietorship if it does not already exist. In this case, the rules and regulations of transferring your DBA name to your newly formed LLC will vary depending on the state in which you operate in. Once you have selected the name for LLC, your next step is to appoint a Registered Agent for your LLC. Your Registered Agent, will be the recipient of all legal and documents, notices of lawsuits and government correspondence on your LLC’s behalf. Your Registered Agent will also provide your LLC with a legal address if you choose to not use your personal address for privacy reasons. The name of your LLC and your Registered Agent are required in the forms you need to file in order to form your LLC. To form your LLC, you need to file an Articles of Organization form with your respective Secretary of State. In filing for your LLC you should make sure your personal property and assets remain separate from your LLC’s property and assets. It is important that new bank accounts, under the name of your LLC, be opened, and new business licences and permits be filed for your LLC. The most important part is creating that distinction between personal and company assets, bank accounts, etc. to ensure that limited liability within your LLC will always be maintained. As part of the requirements for an LLC, you will also have to create an internal Operating Agreement which outlines the ownership and operating procedure of your LLC, and also register for an Employer Identification Number (EIU). The Internal Revenue Service (IRS) requires that sole proprietors who wish to convert to an LLC register for an entirely new EIN for their LLC.
And there you have it, all you need to know to convert your sole proprietorship to an LLC. For more information on sole proprietorships, LLCs or how to convert from first to the latter, visit this site, and let TRUiC help you make your business dreams a reality in a few easy steps.