Why switch
- Limited liability protection
- Cleaner owner compensation options
- Path to S‑Corp or C‑Corp tax treatment later
Formation steps
- Choose a state and name, file Articles of Organization.
- Draft an Operating Agreement.
- Designate a registered agent.
- Obtain required licenses.
EIN, bank & bookkeeping
Apply for a new EIN, open a dedicated business bank account, and update your accounting system to reflect the new entity.
Optional S‑Corp election
When profits and owner involvement justify payroll, consider electing S‑Corp status and setting a reasonable salary.
Transition checklist
- Update contracts and vendor accounts to the LLC.
- Notify clients and update invoices.
- Close sole prop permits if required.