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    11 Replies Latest reply on Dec 31, 2009 5:34 AM by 1000QUESTIONS

    BUSINESS STRUCTURE

    1000QUESTIONS Wayfarer
      If I started a business as sole proprietor, would it be difficult or troublesome to change it to an LLC. What would I have to do?
        • Re: BUSINESS STRUCTURE
          Navigator
          Easy-- just file some new paperwork for an EIN and get registered in your state. Your local secretary of state or your accountant will help you. There is a ton of literature on how. You can't avoid taxes with a particular business structure, so my advice is focus on making your business successful and be proud to pay taxes as an American!
          :)

          Dennis
          dennis@blitzlocal.com
            • Re: BUSINESS STRUCTURE
              1000QUESTIONS Wayfarer
              Mongoose I appreciate your attempt at an response but I am lost as to where you went with it. My question has nothing to do with EIN. It also doesn't have anything to do with paying taxes, especially avoiding them. I have no interest in avoiding taxes.So I think you may have been answering someone else's question. I am simply interested in knowing if it would be difficult or troublesome to start as a sole proprietor and then change to a LLC and what would be involved. Changing your business structure usually doesn't require you change your EIN which I can obtain as a sole proprietor just so you know. Also this is a forum where people post questions and others post answers. This is not where I go to be told to have my accountant or lawyer help me because if I had one there apparently would be no reason I would be asking questions here because my lawyer or accountant would be taking care of everything for me. Maybe my accountant or lawyer is not taking care of business as he or she should and I need to make sure they are not taking advantage of me or the company!
                • Re: BUSINESS STRUCTURE
                  Navigator
                  Hi 1000 questions,

                  I appreciate the chiding, but perhaps read my message here and you'll see why my advice is what I wrote. When you move from a sole proprietorship to a LLC or C corp, you are no longer operating as an individual. You do need a new EIN from the IRS. That requires some simple, but necessary filings. I won't go into all the things necessary to set up a LLC, C Corp, S Corp, and so forth, but suffice it to say that there are increasing levels of paperwork for these business structures. I myself moved from a sole proprietorship to an LLC, since we are a US-based business with less than 50 shareholders (none are international), and we're okay with taxes/earnings flowing directly through to members.

                  I'd encourage you to talk to friends of yours who have gone through this before. That may save you money compared with an attorney that might charge you $5k to give the advice we're providing here (I'm not a lawyer either, just someone who's been through this process a few times). Hope that's helpful. Business structures, unfortunately, have a lot to do with taxes-- that's just how it is. Not trying to imply that you want to shirk taxes. At the same time, I've taken classes on Entrepreneurship in college and we've covered this topic in far greater detail-- I'll tell you that you should be more focused on whether you need legal liability protection and if you're okay with filing requirements by state.

                  Dennis
                  dennis@blitzlocal.com
                    • Re: BUSINESS STRUCTURE
                      1000QUESTIONS Wayfarer
                      Mongoose once again I want to thank you for the response. I truly mean that. However you are still way off target. I do not wish for you to explain to me the requirements or implications for becoming an LLC. What I want to know for the third time is, If I start as a sole proprietor and switch to an LLC is the switching difficult or troublesome. Please don't tell me about anything else. The key word is switching not taxes or EIN. Please don't mention either of them again. I have no interest in information on taxes or EIN even if they are related to my business structure. I am simply interested in the switching process not what happens when I switch! So lets say I knew the answer I would say listen, to switch your business structure you would have to file form 3683 with the state. Its not that long or difficult. ( I'm just making this up so you know). Thank you...
                • Re: BUSINESS STRUCTURE
                  NewWestBiz Newbie
                  Actually the process is much easier than most people make it out to be. To clarify one thing form the LLC first then get the EIN. Never get an EIN for an entity that doesnt exist.
                  Back to your question, articles are filed with the secretary of state in the state you wish to form the LLC in. I say the state you wish because not all states are created equal. Once the LLC is filed with the state and you have obtained its EIN number change your bank accounts and business licenses to reflect the business is now an LLC. More over draft or have an Operating Agreement drafted for the LLC. It is essentially the rules of the company. FYI if you are the sole member of the LLC (owner) it will be considered a disregarded entity by the IRS for tax purposes. Basically it doesnt exist it flows through to your personal taxes. I hope this helped you, if i can be of any help dont hesitate to contact me.
                  1 of 1 people found this helpful
                    • Re: BUSINESS STRUCTURE
                      1000QUESTIONS Wayfarer
                      NewWestBiz your answer was helpful. You seem informed and educated on certain topics. However, you have gone off track as far as answering my question goes. I am not looking for advice on whether I should start as an sole proprietor or an LLC. Nor am I interested in what to do after I switch. I just came off of the irs website reading the requirements for changing your EIN if you are a sole proprietorship and it states that the only time you should change it is when 1. you are subject to bankruptcy proceedings 2. You incorporate 3. You take in partners and form a partnership 4. You purchase or inherit a business that you operate as a sole proprietor. Thats it. I already have an EIN as a sole proprietor for my company. It does exist!
                    • Re: BUSINESS STRUCTURE
                      HenryZL Wayfarer

                      Hi 1000Questions, if you need any pointers for the operating agreement my email is: ssoviolin.hzliao@stanford.edu

                       

                      It's straightforward in most cases unless multiple owners are involved...

                       

                       


                      I'm currently conducting interviews with entrepreneurs in NY to help budding and seasoned businesspersons share their experiences. Would you be interested in being interviewed? Let me know :)
                      • Re: BUSINESS STRUCTURE
                        HenryZL Wayfarer
                        Hi 1000Questions,

                        Technically there is no de jure "conversion" from a sole proprietorship to a LLC since the sole proprietorship is not recognized as a legal entity separate from the person(s) who control it.
                        The conversion is de facto, which means one files the LLC formation documents in the jurisdiction of choice just as if he/she were starting a new LLC from scratch.

                        The entire de facto conversion process does involve some more complicated issues including the transfer of business assets (i.e. contracts and leases) from the sole proprietorship to the LLC, DBA, as well as the EIN.

                        Here are some relevant articles, including a sole proprietor's anecdote, that you mind find useful:
                        http://www.sahoa.org/solep_to_llc.htm
                        http://www.thefreelibrary.com/Converting+a+sole+proprietorship+into+an+LLC-a0137362544
                        http://www.ehow.com/how_2040157_convert-sole-limited.html

                        Disclaimer: This answer is for informational purposes only and does not constitute general or specific legal advice, nor create an attorney client relationship.
                        • Re: BUSINESS STRUCTURE
                          yehia1 Newbie
                          well be sure to do your homework and no what your getting in to but if you setup your current location right and your profits are good you shouldnt have any promblems