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Converting a Sole Proprietorship to an LLC

Converting a Sole Proprietorship to an LLC

Converting a sole proprietorship to an LLC means forming a new limited liability company and moving your existing business into it; because a sole proprietorship is not a registered entity, no state offers a filing that literally “converts” one. The process takes five steps: choose a name ending in “LLC,” file Articles of Organization with your Secretary of State, appoint a registered agent, sign an operating agreement, and settle your EIN. State filing fees range from $35 (Montana) to $500 (Massachusetts), averaging about $132, and approval takes anywhere from same-day to four weeks depending on the state. You need a new EIN only if the LLC will have employees, owe excise tax, or elect S-corp or C-corp taxation, the IRS allows a single-member LLC taxed as a disregarded entity to keep using its sole proprietor EIN, though most banks request a new one anyway. You then update licenses and permits, open a dedicated LLC bank account, and formally reassign contracts and assets to the LLC to preserve liability protection.