Can I convert my existing business to an LLC?
If you have already established and registered your business and did not realize the various benefits of forming a limited liability company, you may wonder if you can change your mind. Actually, converting your existing business to an LLC is probably easier than converting an LLC to a different type of business. How you go about the conversion to an LLC business depends on your current establishment.
A sole proprietorship might be the simplest to convert, but a business partnership or corporation may be more involved. What is a business partnership? It is when two or more people share in the ownership of an unincorporated business. It is often treated much like a sole proprietorship in that it is a pass-through business structure.
- Sole Proprietorship: A sole proprietor needs to file the Articles of Incorporation with their state and pay any necessary fees. The next step is to apply for an EIN if you need one, as well as any necessary business permits or licenses.
- Business Partnership: To convert a partnership, you must fill out and file the Articles of Organization and pay the filing fee. The business assets should then be transferred to the LLC and the previously registered partnership should be shut down by filing a Certificate of Cancellation with the state.
- Corporation: Corporations must have approval from directors and stockholders to convert, then file a Certificate of Conversion along with an LLC Certificate of Formation with the Secretary of State. If the conversion will be a merger or non-statutory conversion, the paperwork may be slightly different and more complicated.
Keep in mind that filing LLC paperwork to convert an existing business may also have extensive tax implications. Typically, corporations will have to pay additional taxes because the IRS views the conversation as if the business sold its assets to the LLC. Start the conversion process by filling out the necessary forms through GovDocFiling.