Converting Sole Proprietorship to LLC

[oats123]

Sorry if this has been asked, but I couldn't find much on this exact situation...

My wife's event planning business is currently set up as a sole proprietorship, and the weddings I've shot thus far have been through her business name/tax id. We're planning to go ahead and change the business structure to an LLC, and I would like to set up the photography side of things under a different name, but both using the same tax id for accounting purposes. The reading I've been doing tells me that this is allowed, and I think all we need to do is file the LLC paperwork with her business as the primary name, and then a separate DBA for the other business name. Is that it or is there more to it than that? Also, does her current tax id transfer to the LLC or will she have to file additional paperwork to get a new one?

Thanks!

[soonerdg]

You are correct that you can file a DBA to use for your photography purposes. All accounting and tax would roll up to the corportation. However, if I understand the process correctly, you can't just incorporate your existing business. What you have to do is establish the new corporation and then transfer the assets of the existing business to the new company. This would mean you would need a new tax ID. Additionally, there are tax implications with the transfer of assets.

Here's a link to an article that explains the process pretty well but doesn't go into the tax stuff. You'd probably be better off to talk to a CPA about that.

How to Incorporate a Sole Proprietorship | The Startup Lawyer

[HotHolly]

You set up the LLC as the parent company and then file the DBAs under the LLC. You have to refile the DBAs with the county and state. ymmv depending on where you are. You get a new EIN number and a new sales tax number. The transition was fairly smooth for us.

[soonerdg]

You can do it like that. But, if you don't go through the process of transfering assets then you have not fully separated you and your personal assets from the company and it's assets. If you were to be sued (hopefully you wouldn't be but it's the world we live in) your personal assets (house, car, personal bank accounts etc) would still be tied to the company and, therefore, vulnerable to the lawsuit.

[WarrenG]

Josh,

You should consult an attorney and your CPA when forming a corporation, but here is what I can share with you... you have several options once you form an LLC. You can set up an LLC as the parent company, and then have a DBA for both you and your wife's companies. When you set up the LLC you will generally submit for an EIN (even though an LLC is a pass through for tax purposes, I do not believe she can use the existing Tax ID unless you structure the the new LLC as a SMLLC - Single Member LLC). Regardless, once you have the LLC formed you can file the DBA's for the names of the entities you are doing business under, and your accountant can set up your books to reflect the structure. The most important aspect of all of this however, is that you will want a well structured operating agreement to account for all of your plans... and this is where the attorney / cpa input is very important, especially if you want to be able to take full advantage of the benefits the LLC provides.

Hope this helps out,

W

[oats123]

Excellent information...I do plan to consult with a lawyer/CPA before doing all of this. Thanks ya'll!

[ronocnikral]

it's not really converting...it's starting an entirely different company, tranferring assets/contracts etc and closing down the partnership/SP if you desire to do so.

in addition to a sales tax ID, DBA, etc, you need to open new bank accounts as well. hopefully your contracts on the books are written well to cover you for such a conversion...