In a previous post, I chatted about the difference between a sole proprietorship and a limited liability company (LLC). Today, let’s chat about another frequently asked question, when is the right time to convert a sole proprietorship into a LLC?
When to Convert a Sole Proprietorship to a LLC
The short answer, as soon as possible.
While it’s perfectly fine to run your business as a sole proprietorship in the beginning, there’s no legal protection in this status. Registering your business as a LLC doesn’t involve that much paperwork and so long as you operate as a single-member LLC (i.e. you don’t have any employees), the tax implications remain the same.
There are a bit of upfront costs associated with registering your business as a LLC so you’ll want to be making enough money from your business to justify those costs. The costs differ by state. A quick google search should let you know how much a LLC filing costs in your state. You’ll also want to take a look at any annual or bi-annual fee requirements for keeping your LLC registration up to date.
The added legal protection of a LLC (read all about it here!) is worth the investment. And an added bonus is that registering your business as a LLC adds an heir of legitimacy to your business.
If you have any questions about sole proprietorship or limited liability companies, feel free to email me at firstname.lastname@example.org!