Many entrepreneurs prefer the conversion of a sole proprietorship to an LLC to protect personal property from business-related lawsuits. However, in some states, certain professionals can’t form an LLC.
Key Steps in Converting to an LLC
- Choosing a registered agent
- Filing registration paperwork with the state government
- Applying for business permits
- Obtaining an employer identification number (EIN)
Submission of LLC Application
The application for registering the transformation of a sole proprietorship into an LLC should be submitted by all members of the transformed company’s management board.
The process of converting an LLC into a sole proprietorship is complex and requires examination of the legal and financial implications. Nevertheless, the process involves: Dissolving the LLC, filing a Certificate of Dissolution with the state, and distributing assets to members.
- Confirm business name availability
- File articles of organization
- Draft and execute an operating agreement
- Tie up loose ends
Advantages of LLC Conversion
- Limited liability
- Pass-through taxation
- Ease of establishment
Seek professional advice before changing your business structure. Consider your business risks and if an LLC is right for you. Because of limited liability, many prefer changing a sole proprietorship to an LLC to protect personal assets. However, in some states, certain professionals can’t form an LLC.