How to Convert a Sole Proprietorship to an LLC

Convert your sole prop to LLC in 6 steps: file formation docs, get EIN, update accounts, transfer assets, notify stakeholders.

1. File LLC formation documents with your state. Submit Articles of Organization (or Certificate of Formation) with your state's Secretary of State office. Most states charge $50-$500 in filing fees. Choose a registered agent—yourself or a service—to receive legal documents at a state address.
2. Apply for a new federal EIN. File Form SS-4 with the IRS for a new Employer Identification Number, even if you had an EIN as a sole prop. The LLC is a separate tax entity. Keep your old EIN documentation for final sole prop tax filings.
3. Open new business bank accounts. Open checking and savings accounts in the LLC's name using your formation documents and new EIN. Transfer business funds from personal accounts—maintain clear records of this transfer as it becomes your initial capital contribution.
4. Transfer business assets and contracts. Formally assign business assets (equipment, inventory, intellectual property) from yourself to the LLC. Review contracts with vendors and clients—some require consent for assignment, others transfer automatically. Update lease agreements and insurance policies.
5. Update licenses and registrations. Transfer business licenses, permits, and professional registrations to the LLC. Contact your state's revenue department for sales tax permits. Update workers' compensation and unemployment insurance registrations if you have employees.
6. Notify stakeholders and update records. Send formal notice to clients, vendors, lenders, and insurance companies of the entity change. Update invoices, contracts, and marketing materials with new legal name. File final sole proprietorship tax return and begin LLC accounting systems.