Changing From A Sole Proprietorship To An LLC
Owning your own business comes with perks. You get to run the company however you want and work the hours you want. You don’t have a boss, which can be nice.
Running a business also means you have to make some hard decisions. For example, how will you structure your company?
Many people choose a sole proprietorship at first, especially when they have no partners and a limited number of employees. Sole proprietorships are great because they are easy to set up. However, once your business grows, you may want to choose something less risky.
That’s why many business owners choose limited liability companies (LLCs). LLCs are nice because they offer the best of both worlds. They are easy to set up and operate, plus they separate the business from your personal finances. For example, if you get sued as a business owner, your personal possessions – such as your home or vehicles – won’t be affected.
By separating a company and its assets, you ensure that any business debt stays with the business. You have no personal liability, so your personal assets will not be affected. If you are afraid that your private information may be subject to litigation, an LLC can provide the best solution. You can switch from a sole proprietorship to an LLC at any time. Here’s how.
Changing to an LLC
The first step is to create a unique name that ends in “LLC”. You should be able to check a database to see what names are available. Once you choose a name, file the required legal papers to reserve it.
Each LLC must have a person responsible, or registered agent, who can receive government correspondence. These documents include tax forms, lawsuits, subpoenas, and business paperwork from the government. You can serve as your own agent or choose a third party.
You must then file The Articles of Organization, which is a legal document that outlines the fundamental characteristics of the LLC. This document includes the LLC’s name, purpose, management structure, and the registered agent’s name and address. This document is filed with the state government.
You will also need an operating agreement that describes how the business will be operated. Next, you will need a federal identification number known as an Employer Identification Number (EIN). This EIN is used for financial and tax purposes. You never want to mix your business funds with your personal finances. Be sure to use your EIN to open a business bank account.
Learn More About Sole Proprietorships
Sole proprietorships work well at first, but as a company expands, there are other company formations that provide more protection.
Orlando sole proprietorship lawyer B.F. Godfrey from Godfrey Legal can help you choose the right business structure. We’ll help you make the correct decision that will lead your business to success. Schedule a consultation with our office by filling out the online form or calling (407) 890-0023.