How to Convert a Sole Proprietorship to an LLC
There are a lot of reasons to convert a sole proprietorship to an LLC: limited liability protection and tax benefits, just to name a few. Most states make it fairly easy to convert a sole proprietorship to an LLC.
- First, you need to file Articles of Organization with your state’s Secretary of State.
- If your sole proprietorship was operating under a DBA or a trade name, and that DBA or trade name is different than the name you will use for the LLC, you can withdraw the previous trade name registration and re-file it as a trade name of the LLC.
- If your sole proprietorship already had an EIN, you will need to apply for a new one. If you did not already have an EIN, you may need to get one now so you can open a new bank account, hire employees, etc.
- Draft the Operating Agreement for your LLC.
- Be sure to contact your county and city if your sole proprietorship had a business license or permits issued by the county or city. You’ll want to let them know that the business is now an LLC, and they may require that you obtain a new license or permit for the LLC.
- Moving forward, make sure any contracts or other agreements are signed by the LLC. As a sole proprietor, you are personally a party to any contracts. But as an LLC, it is the LLC who should be signing the contracts.
- Follow corporate formalities, avoid commingling funds, and a keep your LLC adequately capitalized to avoid piercing the corporate veil.
It is best to seek the assistance of an attorney if you want to convert a sole proprietorship to an LLC. Denver business attorney Aiden Durham is here to help! LLC Setup Packages start at just $500. Contact me today to get started.