There technically isn’t a way to “convert” a Sole Proprietorship into an LLC, since a Sole Proprietorship isn’t a business entity. A Sole Proprietorship is simply you operating a business as yourself. There is no separate and distinct legal entity filing with the state. A Sole Proprietorship business is simply created by you just operating your business activities. It’s that simple. In order to change a Sole Proprietorship to an LLC, you stop using the Sole Proprietorship and then form an LLC.
Now, if you operate a Sole Proprietorship and are doing business under a name besides your first and last name, then you’ll likely have filed a Fictitious Name or DBA (“Doing Business As”). A DBA may also be called an Assumed Name or Trade Name, depending on the state or county where it is filed. After you form your LLC, you will cancel/withdrawal this name.
Incorporating a Sole Proprietorship
A lot of people ask, “how can I incorporate a Sole Proprietorship?” That is the wrong use of language, since the verb “incorporate” means to form a C-Corporation.
However, the term “incorporating a Sole Proprietorship” is mostly used by people who want to stop operating as a Sole Proprietorship and form an LLC in order to protect their personal assets.
Now that we got that out of the way, let’s discuss how to change (or “convert”) your Sole Proprietorship to an LLC.
The first thing you’ll do is form an LLC. You can read our best state to form an LLC article first, then select your state below. The short version of “what’s the best state” is that you should form your LLC where you are doing business. If you don’t have a storefront or retail location, this will likely be the state where you reside. If you’re buying real estate with your LLC, you’ll need to form the LLC in the state where the property is located.
How to form an LLC:
New Hampshire LLC
New Jersey LLC
New Mexico LLC
New York LLC
North Carolina LLC
North Dakota LLC
Rhode Island LLC
South Carolina LLC
South Dakota LLC
Washington DC LLC
West Virginia LLC
After you file for your LLC with the state, you’ll need to wait for the LLC to be approved.
If you have a Sole Proprietorship business under your own name (and you don’t have a DBA/Fictitious Name), then you’ll just start operating under the new LLC. Make sure to open an LLC bank account, order new business cards, update your website, domain name and hosting, update your business license or permit (if applicable), and make any other changes/updates where needed so your business material now reflects your LLC name.
If you have a Sole Proprietorship business and have a registered a DBA/Fictitious Name, you’ll still need to take care of the above (updating your business information). Then you’ll need to cancel your DBA filing. This may be referred to as withdrawing your DBA or revoking your DBA, again, depending on the state or county where the DBA was registered.
You don’t have to cancel the DBA right away. You should take care of the LLC filing first as well as updating the IRS if you already have an EIN.
The easiest thing to do with your EIN when changing from a Sole Proprietorship to an LLC is to get a new EIN for the LLC and then cancel your EIN for your Sole Proprietorship (after you file your final tax return in April).
As with the Fictitious Name, you don’t have to cancel your EIN right away (and you shouldn’t). After forming your LLC, it’s easiest to get a new EIN and then cancel the old one. This is the method that we recommend.
If you want to keep the history of your existing business or keep your EIN for other reasons, you can “transfer” EIN from your Sole Proprietorship to your LLC. You can only do this though if your LLC is a single-member LLC (1 owner) and:
- the LLC will be taxed as a Disregarded Entity/Sole Proprietorship (this is the default tax status for single-member LLCs)
- the LLC won’t be taxed as a C-Corp
- the LLC won’t be taxed as an S-Corp
- the LLC doesn’t have employees
- the LLC doesn’t employee tax liability
- the LLC doesn’t have excise tax liability
If your single-member LLC meets the requirements above, then you can mail a letter to the IRS requesting the EIN be changed from your Sole Proprietorship to your LLC.
We’ve provided a free letter below that you can use to send to the IRS.
If your LLC doesn’t meet the requirements above, or you formed a multi-member LLC, or you prefer to start fresh with a new EIN, skip ahead a section for instructions on how to obtain a new EIN for your LLC.
Change EIN from Sole Proprietor to LLC
In order to change your EIN from your Sole Proprietorship to your LLC, you’ll need to send a request letter to the IRS.
You’ll need to include your existing Sole Proprietor EIN number, your phone number, your mailing address, and mention that the LLC meets the requirements mentioned above. You’ll also want to include a copy of your approved Articles of Organization (which may be called a Certificate of Organization or Certificate of Formation, depending on where you formed your LLC).
The IRS will then mail you back a confirmation letter in 30-45 days, confirming that your existing EIN has been transferred.
Here is a free IRS template letter you can use to switch over your EIN:
IRS mail or fax instructions:
|If LLC's principal business address or location is in:||Mail letter to:||Or fax letter to:|
|Connecticut, Delaware, District of Columbia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, West Virginia or Wisconsin||Internal Revenue Service|
Cincinnati, OH 45999-0023
|Alabama, Alaska, Arkansas, Arizona, California, Colorado, Florida, Georgia, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Utah, Washington, Wyoming, or any place outside of the United States||Internal Revenue Service|
Ogden, UT 84201
New EIN for LLC
If you are getting a new EIN for your LLC, make sure to follow one of our How to Form an LLC courses. They include sub-lessons that will show you how to get a new EIN number for your LLC.
You can also see our national EIN lesson here: