It is pretty natural for people to start their businesses as sole proprietors. Most often, the reason behind starting a business with such a model is that they do not want to plan the business properly. Instead, they just want to start selling services or products right away.

Likewise, some just do not want to go through the effort or put in the cost of incorporating unless they know that the business is viable or not. But you know that you need to incorporate it at one point, right?

Wondering at what point should I transition from a sole proprietorship to an LLC? This discussion has the answer!

When Should You Convert from Sole Proprietorship to LLC?

Generally, people will make the switch from a sole proprietorship to an LLC if they find the requirement of one or more factors of the following:

Limited Liability

When you are rolling with sole proprietorship, you are your business. In other words, all legal issues and debts are your concerns. However, your business becomes a separate entity when you shift to an LLC.

So, you have started an LLC and had a lot of hopes regarding the business. But at one point, you got to know the truth.

You learned that you made a mistake by forming an LLC. And instead, you should have started a Professional Corporation.

 

Now, you might be thinking, what are my options if I already have an LLC but realize I need a Professional Corporation, right?

If you have realized that you need to form a Prof Corp, your options are either C Corp or S Corp. But what are they? And how is a Professional Corp different from LLC? Read to find out!

For help, email me at sam@mollaeilaw.com and I will be happy to assist you.

What Are Professional Corporations?

Before anything else, you need to know that shareholders create corporations. And at its core, a corporation is a separate legal entity.

It is a business type where the owners will not be personally liable for the lawful debts and disputes of the company.

However, there are several types of corporations.

A limited liability company is a type of business entity becoming more and more popular. It’s a hybrid between a corporation and a partnership, which offers some protection to the owners. Let’s take a look at what LLCs are, how they work, and why they’re so popular.

A limited liability company is an entity that combines the best aspects of corporations and partnerships. The owners of an LLC have limited liability for the debts and obligations of the company, but they also enjoy some tax benefits and other benefits that come from being in business with other people.

If you found yourself reading this article, you might be an entrepreneur, interested in starting an LLC, or already have an LLC

Well, this article is for you…

The first tax election you may choose is your LLC taxed as a sole proprietor.

LLC offers maximum flexibility. This is common for small business owners who either don’t want to deal with the paperwork and compliance or just want to start as an LLC.
The main benefit of a single-member LLC is that you don’t have to file separate tax returns.