Are you a sole proprietor who wants to incorporate because your buzzkill lawyer friends have scared the bejeezus out of you with horror stories of getting your personal finances wiped out after a lawsuit that really involves your business? Good. That’s one of those skills we learn in law school and hone while practicing and seeing what happens when things go horribly, terribly wrong.
Anyway, so you’re ready to incorporate, but you have been operating properly as a sole proprietor. You have licenses, a tax permit, etc. How do you change into an LLC or corporation?
In Nevada, there is no way to simply change from operating as a sole proprietor to an LLC or corporation. To operate as an entity, you are required to file Articles of Organization or Incorporation with the Secretary of State as if you’re starting from scratch. Keep in mind, though, that if you have an account with the Nevada Department of Transportation or local business licenses, you’ll need to change those over to the entity once it’s formed.
What about going the other way – LLC to sole proprietor? My little business consulting company is doing less and less (not working very hard at it) and the LLC costs are high. I probably know your buzzkill answer but I wanted to ask anyway.
To transition from an LLC to sole proprietor, register the sole proprietor at the state level and dissolve the LLC. The sequence is important. Register the sole prop at the state level and get your state business license, your NV Department of Taxation registration, and your local license, then begin the process of moving bank, merchant, and other accounts into the sole prop. THEN dissolve the LLC. Doing it in this order ensures you don’t run into trouble trying to change things around with a dissolved LLC.