Change Sole Proprietorship

How to Change Sole Proprietorship to Corporation, Partnership or LLC
Change from Sole Proprietorship

From Sole Proprietorship to...

Convert Your Sole Proprietorship

You can convert a sole proprietorship to LLC, partnership or corporation. Changing a sole proprietorship may be a straightforward process. However, even if your sole proprietorship’s current situation is complex, converting a sole proprietorship into an LLC, partnership, or corporation is something you can do.

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Why change from sole proprietorship to LLC or corporation?

  1. Rest easier with limited liability.
  2. Get a better seat at the table with more investment and growth opportunities.
  3. Have more perks such as a cafeteria plan, 401k, medical insurance, company car, etc.
  4. Attract more and better employees with incentives such as stock options, health care plans, and other benefits.
  5. Make a more permanent legacy for your benefit and for future generations.

How to Convert a Sole Proprietorship

Below, you will learn how to change from sole proprietorship to LLC, partnership or corporation.

Change Sole Proprietorship to LLC

You can convert your sole proprietorship into an LLC (limited liability company). There are many benefits to changing your sole proprietorship and some are listed above. Changing a sole proprietorship to an LLC can be done in three steps: (i) create a sole proprietorship LLC; (ii) transfer all of the sole proprietorship assets and liabilities to your sole proprietorship LLC; and (iii) discontinue your sole proprietorship.

The first step in converting a sole proprietorship into an LLC is the formation of a new LLC. This new LLC will be your sole proprietorship LLC. You can change from sole proprietorship to LLC tax-free, and that should be your goal. To meet your goal, you will need to exchange your sole proprietorship’s assets and liabilities for an equity interest in your new sole proprietorship LLC. The assets can include intangible business assets such as trade secrets, copyrights and research and development.

At the end of the exchange, you will have contributed all of the assets of your sole proprietorship to your new sole proprietorship LLC. In exchange, you will have received a 100% membership interest in your new sole proprietorship LLC. You will then have 100% equity ownership of the sole proprietorship LLC and 100% of the voting power.

Changing from a sole proprietorship to an LLC is finalized by discontinuing the sole proprietorship. This may include filing a certificate of discontinuation with the clerk of each county that you’ve registered to do business in.

That’s basically how to change a sole proprietorship to LLC. The details will vary depending on your situation. Click for a free consultation about how to change sole proprietorship to LLC. Call if you need help or have questions (212) 658-1752.

Self-help Solution – Changing Sole Proprietorship to LLC:

Change Sole Proprietorship to Partnership

It is possible to change a sole proprietorship to partnership. A change from sole proprietorship to partnership may be done to add one or more new owners. To convert a sole proprietorship to partnership: (i) make a partnership agreement; (ii) register the partnership; and (iii) discontinue your sole proprietorship.

To change from sole proprietorship to partnership, you should first come to agreement with your new partner(s). Your partnership agreement will define the inner-workings of your partnership including duties, responsibilities, rights, benefits, management, etc. The partnership agreement will also discuss the assets each partner will contribute to the partnership. Will your new partnership take on any of your sole proprietorship’s liabilities? These are details that you and your partners will discuss and memorialize in a partnership agreement.

After creating your new partnership, your next step will be to register the partnership. The change from sole proprietorship to general partnership requires that a Business Certificate be filed with the clerk of each county in which the partnership will be doing business. If you’re changing from sole proprietorship to limited partnership, you will need to file the appropriate documents with the New York Department of State.

To finalize the change from sole proprietorship to partnership, be sure to discontinue your sole proprietorship. If your sole proprietorship has been registered by filing a Business Certificate with one or more county clerks, you will need to file a certificate of discontinuation with each of those county clerks.

That’s basically how to change a sole proprietorship to partnership. The details will vary depending on your situation. Click for a free lawyer consultation. Call for help or with questions (212) 658-1752.

Self-help Solution – Convert Sole Proprietorship to Partnership:

  • Discontinue Sole Proprietorship: download Sole Proprietorship Cheat Sheet to learn about discontinuing your sole proprietorship D/B/A Business Certificate.

Change Partnership to Sole Proprietorship

You can convert your partnership to sole proprietorship in a few steps. Basically, you are downsizing from joint ownership/management to you being the only owner and possibly the only manager. To change from partnership to sole proprietorship: (i) terminate your partnership; and (ii) register your sole proprietorship.

A change from partnership to sole proprietorship is best preceded by a clear ending of the partnership. A written agreement that sets out the specifics of the termination, and clearly details which partner gets which asset or liability will help you convert your partnership to sole proprietorship with fewer problems. After you’ve finalized the agreement, you will need to discontinue the partnership by filing the appropriate document(s) with either one or more county clerk(s) or the New York Department of State.

The next step will be to set-up your sole proprietorship. The termination of your partnership should leave you (personally) as the clear owner of the specified business assets. You may also be personally responsible for certain liabilities. These business assets and liabilities will become the assets and liabilities of your sole proprietorship. To learn how to complete the change from partnership to sole proprietorship by setting up a sole proprietorship, use the below self-help solutions.

That’s basically how to change a partnership to sole proprietorship. The details will vary depending on your situation. Click for a free lawyer consultation. Call for help or with questions (212) 658-1752.

Self-help Solution – Change Partnership to Sole Proprietorship:

Change Sole Proprietorship to Corporation

Changing from sole proprietorship to corporation is very possible. One thing to remember is that the standard corporation, C corporation, cannot pass losses to its shareholders. If you believe that your business will continue to produce losses, and that you or others will be able to gain a tax advantage from those losses, consider changing from a sole proprietorship to an LLC.

To change a sole proprietorship to a corporation: (i) form the corporation; (ii) exchange sole proprietorship assets and liabilities for stock in your corporation; and (iii) discontinue your sole proprietorship.

The first step in changing a sole proprietorship to corporation is the formation of a corporation. This corporation will be your sole proprietorship corporation. Your goal should be a tax-free change from sole proprietorship to corporation. To meet your goal, you will need to exchange your sole proprietorship’s assets and liabilities for an equity interest in your new sole proprietorship corporation. The assets can include intangible business assets such as trade secrets, copyrights and research and development.

At the end of the exchange, you will have used your sole proprietorship assets to purchase the stock of your new sole proprietorship corporation. In exchange, you will receive 100% of the issued and outstanding common stock of your new sole proprietorship corporation. You will then have 100% equity ownership of the sole proprietorship corporation and 100% of the voting power. If there are other corporation shareholders, you may need to do more to complete a tax-free change from sole proprietorship to corporation.

The change from sole proprietorship to corporation is finalized by discontinuing the sole proprietorship. This may include filing a certificate of discontinuation with the clerk of each county that the sole proprietorship is registered to do business in.

Those are the basics of how to change a sole proprietorship to corporation. The details may vary depending on your situation. Get a free lawyer consultation about changing from sole proprietorship to corporation. Call for help or if you have questions (212) 658-1752.

Self-help Solution – Change Sole Proprietorship to Corporation:

  • Discontinue Sole Proprietorship: download Sole Proprietorship Cheat Sheet to learn about discontinuing your sole proprietorship D/B/A Business Certificate.
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