How To Change a Business from Sole Proprietorship to Corporation

Having business consultation

A sole proprietorship is a business type wherein a single owner is in charge of the entire business. This is advantageous if you are just starting out your small business on your own. Most people who are just starting out go for sole proprietorship first. When their business blooms, they may change the sole proprietorship business into a corporation. A corporation is also a business structure wherein the business has its own assets and liabilities apart from those of the owners.

For some businesses, it is more beneficial to change into a corporation rather than stay as a sole proprietorship business. If you are going through this change, you can follow the steps below on how you can change a business from a sole proprietorship to a corporation:

  1. Contact a tax professional. The first step to this change is to contact and get the opinion of a tax professional or a lawyer. This is a crucial step as your decision may change after you have heard the pros and cons of changing from a sole proprietorship to a corporation. After you have contacted and asked advice from a professional, you can already proceed with the steps below.
  2. Contact IRS. The next step would be to let the IRS know about your decision. This is also needed, as you may have to get a new EIN or Employee Identification Number. They will also let you know about the necessary things that you have to do in when you change your business from a sole proprietorship into a corporation.
  3. Secretary of state. Notify the secretary of state regarding this decision. You will need to fill up some documents like the Articles of Incorporation when you do this. Some of the things that will be asked of you are the name of the corporation, the vision and mission of your business, the structure and other important details that regarding your business. You may need to get the help of a lawyer to help you through these steps.
  4. Do the necessary paperwork. You will have to go through an evaluation before you get your sole proprietorship business into a corporation. A lot of things about your business must be looked into before any changes can occur. If will be best if you look into the policies for your state. Different states have different laws regarding business structure changes. It is best if you consult your local government office to know the necessary steps to take.

These are the simple steps that you have to do in order for you to change your sole proprietorship business into a corporation. Before you go through this, it is best that you have a reliable lawyer back you up with your decision. Do not make any decisions immediately until you know all the details and the effects the changes will have on your business. It is important not to rush into things as changing your business back to its previous structure is a difficult thing to do.


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