{"id":27940,"date":"2023-09-01T09:33:53","date_gmt":"2023-09-01T09:33:53","guid":{"rendered":"https:\/\/boostsuite.com\/?page_id=27940"},"modified":"2023-09-01T10:43:59","modified_gmt":"2023-09-01T10:43:59","slug":"change-from-sole-proprietor","status":"publish","type":"page","link":"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/","title":{"rendered":"How to Change From Sole Proprietor to LLC"},"content":{"rendered":"\n<p>It\u2019s the dream goal of any passionate entrepreneur: Business is booming and you\u2019re finally ready to convert your business structure from sole proprietorship to LLC.&nbsp;<\/p>\n\n\n\n<p>LLC owners enjoy multiple legal and tax benefits, and many business owners agree it\u2019s worth making the change.&nbsp;<\/p>\n\n\n\n<p>But before you make that leap, you need to decide whether a sole proprietorship or LLC is the best structure for your business, as well as learning the steps to switching from a sole proprietorship to a limited liability company (LLC).&nbsp;<\/p>\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_69_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #212121;color:#212121\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #212121;color:#212121\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#What_Is_a_Sole_Proprietorship\" title=\"What Is a Sole Proprietorship?&nbsp;\">What Is a Sole Proprietorship?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#What_Is_a_Limited_Liability_Company\" title=\"What Is a Limited Liability Company?&nbsp;\">What Is a Limited Liability Company?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#How_to_Change_From_a_Sole_Proprietorship_to_an_LLC\" title=\"How to Change From a Sole Proprietorship to an LLC\">How to Change From a Sole Proprietorship to an LLC<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#1_Obtain_Articles_of_Organization_Certificate_of_Formation_or_Certificate_of_Organization_form\" title=\"1. Obtain Articles of Organization, Certificate of Formation, or Certificate of Organization form\">1. Obtain Articles of Organization, Certificate of Formation, or Certificate of Organization form<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#2_Confirm_Business_Name_Availability\" title=\"2. Confirm Business Name Availability\">2. Confirm Business Name Availability<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#3_Choose_a_Registered_Agent_or_Statutory_Agent\" title=\"3. Choose a Registered Agent or Statutory Agent\">3. Choose a Registered Agent or Statutory Agent<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#4_Choose_Your_LLC_Address\" title=\"4. Choose Your LLC Address\">4. Choose Your LLC Address<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#5_File_Your_Formation_Documents\" title=\"5. File Your Formation Documents\">5. File Your Formation Documents<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#Advantages_and_Disadvantages_of_Sole_Proprietorship\" title=\"Advantages and Disadvantages of Sole Proprietorship\">Advantages and Disadvantages of Sole Proprietorship<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#Advantages\" title=\"Advantages\">Advantages<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#Tax_Benefits\" title=\"Tax Benefits\">Tax Benefits<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#Easy_Formation\" title=\"Easy Formation\">Easy Formation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#Easier_Taxes\" title=\"Easier Taxes\">Easier Taxes<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#No_Business_Bank_Account_Required\" title=\"No Business Bank Account Required\">No Business Bank Account Required<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#Disadvantages\" title=\"Disadvantages\">Disadvantages<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#No_Legal_Protection\" title=\"No Legal Protection\">No Legal Protection<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#Difficulty_Raising_Capital\" title=\"Difficulty Raising Capital\">Difficulty Raising Capital<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#Differences_Between_Sole_Proprietorships_and_LLCs\" title=\"Differences Between Sole Proprietorships and LLCs\">Differences Between Sole Proprietorships and LLCs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#Reasons_to_Change_From_a_Sole_Proprietorship_to_an_LLC\" title=\"Reasons to Change From a Sole Proprietorship to an LLC\">Reasons to Change From a Sole Proprietorship to an LLC<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#You_Want_Personal_Asset_Protection\" title=\"You Want Personal Asset Protection\">You Want Personal Asset Protection<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#You_Plan_to_Add_a_Business_Partner\" title=\"You Plan to Add a Business Partner\">You Plan to Add a Business Partner<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#You_Want_Tax_Breaks\" title=\"You Want Tax Breaks\">You Want Tax Breaks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#You_Plan_to_Hire_Employees\" title=\"You Plan to Hire Employees\">You Plan to Hire Employees<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#Who_Cant_Form_an_LLC\" title=\"Who Can\u2019t Form an LLC?&nbsp;\">Who Can\u2019t Form an LLC?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#Other_LLC_Activities\" title=\"Other LLC Activities\">Other LLC Activities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Is_a_Sole_Proprietorship\"><\/span>What Is a Sole Proprietorship?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A sole proprietorship is an unincorporated business (not a corporation). It has only one owner, and the owner will pay taxes on the business on their personal tax return. Often, sole proprietors don\u2019t fuss with registering business or trade names and instead conduct business under their own name.&nbsp;<\/p>\n\n\n\n<p>Sole proprietorships are also called sole traders or proprietors. It\u2019s the easiest business structure to get off the ground in most cases, and it\u2019s the easiest to dismantle or dissolve.&nbsp;<\/p>\n\n\n\n<p>Because of this, sole proprietorships are popular with individual contractors, consultants, and freelancers. Many businesses begin their lives as sole proprietorships before transitioning into corporations or limited liability companies at some point.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Is_a_Limited_Liability_Company\"><\/span>What Is a Limited Liability Company?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A limited liability company, or LLC, is a business structure exclusive to the US. LLC owners enjoy limited liability and personal liability or asset protection. The assets and liabilities of the business are automatically separated from the assets and personal property of the business owner.&nbsp;<\/p>\n\n\n\n<p>LLCs provide pass-through taxation and limited liability, and, as such, they\u2019re taxed differently than corporations. Owners of LLCs are only required to pay taxes on their share of the LLC\u2019s profits on their personal income tax filings. Most business owners are drawn to LLCs because of personal asset protection and the tax benefits they provide.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_Change_From_a_Sole_Proprietorship_to_an_LLC\"><\/span>How to Change From a Sole Proprietorship to an LLC<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Making the switch from sole proprietorship to LLC may seem like a daunting task, but once you understand the process it\u2019s actually quite easy. Here are the steps you need to take to convert your sole proprietorship to an LLC.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Obtain_Articles_of_Organization_Certificate_of_Formation_or_Certificate_of_Organization_form\"><\/span>1. Obtain Articles of Organization, Certificate of Formation, or Certificate of Organization form<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Although it\u2019s called different names in different states, every state has a specified form for LLC formation. The first step to changing your sole proprietorship to an LLC is to get this form. It does three important things at once: declares the formation of your new LLC, legally establishes your LLC in your state, and names your LLC members.&nbsp;<\/p>\n\n\n\n<p>In most cases, the articles of organization include basic information about your business, such as its name and address, registered agent, and information about your LLC members. Some states also require you to make a <a href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/business-purpose\/\">Statement of Business Purpose<\/a>, as well.&nbsp;<\/p>\n\n\n\n<p>Now is the time to choose whether your LLC will be <a href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/member-managed-vs-manager-managed-llc\/\">member-managed or manager-managed<\/a>. A member-managed LLC is run by LLC members who vote on the company\u2019s high-level decisions. A manager-managed LLC is one in which one person is in charge of making important decisions.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Confirm_Business_Name_Availability\"><\/span>2. Confirm Business Name Availability<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Next on your journey from sole proprietorship to LLC is to choose a business name, make sure it\u2019s available, and reserve it. To ensure that your business name isn\u2019t already in use by another company, you need to run a business name search. You can typically search your state\u2019s business name database for free on the Secretary of State\u2019s website.&nbsp;<\/p>\n\n\n\n<p>After you\u2019ve confirmed the business name isn\u2019t already in use, it\u2019s a good idea to also run a search on the United States Patent and Trademark Office (USPTO) database. This will tell you whether your business name has already been trademarked and help you avoid any trademark and legal issues.&nbsp;<\/p>\n\n\n\n<p>If there are no issues with your business name, look up your state\u2019s laws about business name designations. Some states require LLCs to use some variation of \u201cLimited Liability Company\u201d or \u201cLLC\u201d in their business names.&nbsp;<\/p>\n\n\n\n<p>You\u2019ll then need to file a business name reservation form, typically called something like a \u201cReservation of Name\u201d form. This form will secure your business name for a specified number of days (usually 120 days). You\u2019ll likely be required to pay a filing fee to submit this form.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_Choose_a_Registered_Agent_or_Statutory_Agent\"><\/span>3. Choose a Registered Agent or Statutory Agent<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A registered agent works as a sort of intermediary between your company, government agencies, and law firms. Some states refer to a registered agent as a \u201cresident agent\u201d or \u201cstatutory agent.\u201d Most states require LLCs to maintain a registered agent, so this is the third step you\u2019ll need to complete.<\/p>\n\n\n\n<p>Registered agents must be available at your registered agent address during normal business hours to accept service of process and official mail on behalf of your business. You\u2019re allowed to be your own registered agent, designate someone close to you that you trust, designate a business, or hire a professional registered agent service.<\/p>\n\n\n\n<p>I reviewed, compared, and rated the 12 best United States registered agent services. You can read the full guide here: <a href=\"https:\/\/boostsuite.com\/best-registered-agent\/\">Best Registered Agent Services<\/a>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"4_Choose_Your_LLC_Address\"><\/span>4. Choose Your LLC Address<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Naming your LLC isn\u2019t the only important consideration when filling out your formation documents. You\u2019re typically required to list a business address for your new LLC as well. The address you choose to specify on your formation documents will be where your business\u2019s mail and legal documents will be sent, which means it\u2019s important.&nbsp;<\/p>\n\n\n\n<p>If you\u2019ve chosen to be your own registered agent, you\u2019ll need to list your business\u2019s physical street address. If it doesn\u2019t have a physical street address, you\u2019ve got no choice but to list your home address or home office address. It\u2019ll go on the public record, so listing your home address puts you at risk for identity theft and other cybercrimes.&nbsp;<\/p>\n\n\n\n<p>If you choose to hire a registered agent service, the company will list its registered agent address on the form. This address isn\u2019t linked to you or your home, which protects your information.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"5_File_Your_Formation_Documents\"><\/span>5. File Your Formation Documents<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>After filling in the necessary information and double-checking it for accuracy, it\u2019s time to file your formation documents. You\u2019ll need to decide whether you\u2019ll be signing the documents yourself or use an LLC organizer to sign the documents.&nbsp;<\/p>\n\n\n\n<p>Of course, signing it yourself puts your information on public record. If you use an LLC formation service, then its information will be listed on public record, rather than your own.&nbsp;<\/p>\n\n\n\n<p>Your state may also have a publication requirement. Some states require new LLCs to publish a notice of formation in newspapers for a certain number of days or weeks. Once this is done, you\u2019ll get a certificate for meeting the publishing requirement, which you can present to your state government when you file your articles of organization.&nbsp;<\/p>\n\n\n\n<p>Your state will likely provide you with filing options, online or in person. Whichever option you choose, there will likely be a filing fee to submit your formation paperwork.&nbsp;<\/p>\n\n\n\n<p>After all of your required documents have been submitted, they will reach out to you (usually either through email or mail) after they\u2019ve processed your payment and paperwork. The processing time varies by state, but you can estimate that it will take two to three weeks, less if you file online.&nbsp;<\/p>\n\n\n\n<p>Some states offer expedited processing, which cuts the time down from weeks to a matter of days, directly from the Secretary of State, while others don\u2019t offer it at all. In states without expedited processing, you can usually still find a business formation service with expedited processing services, for a fee, of course.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Advantages_and_Disadvantages_of_Sole_Proprietorship\"><\/span>Advantages and Disadvantages of Sole Proprietorship<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Some of the key benefits of a sole proprietorship include how cheap it is to form one, inexpensive maintenance, and pass-through tax benefits. Here are some of the benefits and drawbacks of sole proprietorships.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Advantages\"><\/span>Advantages<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Tax_Benefits\"><\/span>Tax Benefits<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>As a pass-through business entity, your business is only taxed once as opposed to multiple times, like a corporation. Many sole proprietorships qualify for a 20% tax break due to the 2017 Tax Cuts and Jobs Act (TCJA), which established tax breaks for different pass-through entities, and up to a 20% tax deduction on qualified income.&nbsp;<\/p>\n\n\n\n<p>This benefit is in effect until January 1, 2026 unless Congress extends or shortens it.&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Easy_Formation\"><\/span>Easy Formation<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>You aren\u2019t required to fill out loads of paperwork to form a sole proprietorship. You often aren\u2019t required to obtain business licenses or register your business with the state. This means you can start your business in a snap.&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Easier_Taxes\"><\/span>Easier Taxes<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Because of the \u201csole\u201d in a sole proprietorship, you typically don\u2019t have to deal with the same tax headaches that other business entities do, like hiring employees and obtaining an employer identification number (EIN) from the US Internal Revenue Service (IRS).&nbsp;<\/p>\n\n\n\n<p>Of course, you can apply for an EIN if you want \u2014 they\u2019re useful for tax purposes and such \u2014 but as a sole proprietor you\u2019re allowed to use your social security number in place of an EIN or other tax identification numbers.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"No_Business_Bank_Account_Required\"><\/span>No Business Bank Account Required<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Many business structures are required to open business bank accounts, but sole proprietorships are the exception to that rule. You\u2019re allowed to run your business transactions through your own personal bank account.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Disadvantages\"><\/span>Disadvantages<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Here are some of the disadvantages of choosing a sole proprietorship.&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"No_Legal_Protection\"><\/span>No Legal Protection<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Sole proprietorships don\u2019t benefit from limited liability protection, as LLCs do. This means that if the business is sued, the business owner\u2019s personal assets and finances are vulnerable.&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Difficulty_Raising_Capital\"><\/span>Difficulty Raising Capital<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>You may find it hard to get funding or equity from financial institutions or investors. Because you\u2019re liable as the owner, it\u2019s difficult to obtain financial assistance. Financial institutions are more likely to work with businesses that have been around for a long time. Your new business and limited funds makes you a high-risk borrower.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Differences_Between_Sole_Proprietorships_and_LLCs\"><\/span>Differences Between Sole Proprietorships and LLCs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There are a number of differences between the two business entities, so it\u2019s good to know how they differ before switching from a sole proprietorship to LLC.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><\/td><td><strong>Sole proprietorship<\/strong><\/td><td><strong>LLC<\/strong><\/td><\/tr><tr><td><strong>Members<\/strong><\/td><td>One member or owner<\/td><td>Can be one member or owner, or multiple organizations or members (such as a multi-member LLC)<\/td><\/tr><tr><td><strong>Taxation<\/strong><\/td><td>All sales and revenue are reported on personal tax returns<\/td><td>Company\u2019s taxes are filed on the personal taxes of one of the owners.&nbsp;<br>If there are two or more owners, then the company is treated as a partnership&nbsp;<\/td><\/tr><tr><td><strong>Legal entity status<\/strong><\/td><td>The business and the owner are considered the same entity<\/td><td>The company is a separate entity from the business owner or owners<\/td><\/tr><tr><td><strong>Formation<\/strong><\/td><td>The business is automatically formed when you start conducting business<\/td><td>The company is formed when you file articles of organization with your state government<\/td><\/tr><tr><td><strong>Business name<\/strong><\/td><td>You can operate under either a fictitious name or the business owner\u2019s name. You\u2019re also allowed to register a DBA or \u201cDoing Business As\u201d name.&nbsp;<\/td><td>The business name is formally registered and established with the state government.&nbsp;<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reasons_to_Change_From_a_Sole_Proprietorship_to_an_LLC\"><\/span>Reasons to Change From a Sole Proprietorship to an LLC<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It\u2019s easier and cheaper to form a sole proprietorship, but easy and cheap aren\u2019t the only benefits to consider. Here are some reasons a business owner may switch from sole proprietor to LLC.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"You_Want_Personal_Asset_Protection\"><\/span>You Want Personal Asset Protection<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As a sole proprietor, your personal assets are vulnerable if your business is ever sued. But thanks to limited liability protection, if you convert to an LLC, your finances and personal assets are considered separate from those of the business.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"You_Plan_to_Add_a_Business_Partner\"><\/span>You Plan to Add a Business Partner<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If you add a business co-owner as a sole proprietor, then your business automatically becomes a general partnership. One of the biggest disadvantages of a general partnership is that your liability exposure doubles.&nbsp;<\/p>\n\n\n\n<p>This is because not only are you liable for everything your business does, you\u2019re also liable for everything your partner does as the co-owner of your business. Yes, even if you didn\u2019t know about the action or sign off on it.&nbsp;<\/p>\n\n\n\n<p>But if you form an LLC, your personal assets and finances are secured no matter what your partner does.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"You_Want_Tax_Breaks\"><\/span>You Want Tax Breaks<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As a sole proprietor, you\u2019re technically self-employed, which means you have to pay self-employment taxes. To get around that, many business owners opt to form an LLC and file taxes as an S corporation. Doing so classifies you as an LLC employee, and you\u2019ll then pay payroll taxes on your salary, as opposed to the entirety of the company\u2019s profits.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"You_Plan_to_Hire_Employees\"><\/span>You Plan to Hire Employees<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Contrary to what its name suggests, you can actually hire employees as a sole proprietor as long as you follow the appropriate tax and employment laws. But it may be easier for you to form an LLC in terms of both taxation and employee compensation. Plus, you get personal asset protection in the event that your employee ever has a legal dispute with your company.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who_Cant_Form_an_LLC\"><\/span>Who Can\u2019t Form an LLC?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Sure, LLCs sound great. But before you go rushing off to file your paperwork, you should know that not everyone is allowed to form one.&nbsp;<\/p>\n\n\n\n<p>Some state governments restrict certain industries from forming LLCs, including banks, trusts, and insurance companies. Certain licensed professionals are also not allowed to form an LLC, such as accountants, doctors, architects, and attorneys.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Other_LLC_Activities\"><\/span>Other LLC Activities<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>After you\u2019ve formed your LLC and legally established it in your state, it\u2019s likely that you\u2019ll be required to take part in other business activities that fall outside of LLC formation, like drafting an LLC operating agreement.&nbsp;<\/p>\n\n\n\n<p>Don\u2019t be fooled into thinking these activities are less important than the LLC formation process \u2014 without them you could lose your company\u2019s good standing. Here\u2019s a look at some of the activities you may have to complete:&nbsp;<\/p>\n\n\n\n<ul>\n<li>Register with your state\u2019s taxation department<\/li>\n\n\n\n<li>Submit an annual report<\/li>\n\n\n\n<li>Pay taxes and filing fees<\/li>\n\n\n\n<li>Apply for business licenses where applicable<\/li>\n\n\n\n<li>Draft an <a href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/operating-agreement\/\">operating agreement<\/a><\/li>\n\n\n\n<li>Open a business bank account<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There are a number of reasons business owners make the switch from sole proprietor to LLC, including personal liability protection and tax advantages. Once you\u2019ve made the decision to change your structure to an LLC, the process isn\u2019t difficult.&nbsp;<\/p>\n\n\n\n<p>If you\u2019d like to learn more about LLC formation, read <a href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/\">How to Start an LLC<\/a>. If you want additional support and assistance throughout the wild and confusing formation process, read the <a href=\"https:\/\/boostsuite.com\/llc\/\">Best LLC Formation Services<\/a>.&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>It\u2019s the dream goal of any passionate entrepreneur: Business is booming and you\u2019re finally ready to convert your business structure from sole proprietorship to LLC.&nbsp; &#8230; <a title=\"How to Change From Sole Proprietor to LLC\" class=\"read-more\" href=\"https:\/\/boostsuite.com\/how-to-start-an-llc\/change-from-sole-proprietor\/\" aria-label=\"Read more about How to Change From Sole Proprietor to LLC\">Read more<\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"parent":20481,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"featured_image_urls_v2":{"full":"","thumbnail":"","medium":"","medium_large":"","large":"","1536x1536":"","2048x2048":""},"post_excerpt_stackable_v2":"<p>It\u2019s the dream goal of any passionate entrepreneur: Business is booming and you\u2019re finally ready to convert your business structure from sole proprietorship to LLC.&nbsp; LLC owners enjoy multiple legal and tax benefits, and many business owners agree it\u2019s worth making the change.&nbsp; But before you make that leap, you need to decide whether a sole proprietorship or LLC is the best structure for your business, as well as learning the steps to switching from a sole proprietorship to a limited liability company (LLC).&nbsp; Table of Contents Toggle What Is a Sole Proprietorship?&nbsp;What Is a Limited Liability Company?&nbsp;How to Change&hellip;<\/p>\n","category_list_v2":"","author_info_v2":{"name":"Aaron Kra","url":"https:\/\/boostsuite.com\/author\/aaron\/"},"comments_num_v2":"0 comments","_links":{"self":[{"href":"https:\/\/boostsuite.com\/wp-json\/wp\/v2\/pages\/27940"}],"collection":[{"href":"https:\/\/boostsuite.com\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/boostsuite.com\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/boostsuite.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/boostsuite.com\/wp-json\/wp\/v2\/comments?post=27940"}],"version-history":[{"count":3,"href":"https:\/\/boostsuite.com\/wp-json\/wp\/v2\/pages\/27940\/revisions"}],"predecessor-version":[{"id":27954,"href":"https:\/\/boostsuite.com\/wp-json\/wp\/v2\/pages\/27940\/revisions\/27954"}],"up":[{"embeddable":true,"href":"https:\/\/boostsuite.com\/wp-json\/wp\/v2\/pages\/20481"}],"wp:attachment":[{"href":"https:\/\/boostsuite.com\/wp-json\/wp\/v2\/media?parent=27940"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}