Like many other aspects of life, businesses are not static. Businesses evolve and grow, decreasing in size in some cases. What this means is that your initial choice of business entity may no longer be suitable.
Changing your business entity may be a necessary step toward achieving your long-term goals. Here are some important points to keep in mind.
Why would a business change entity?
There are several reasons why a business entity may need to change. For example, a sole proprietorship may expand quickly, resulting in the need to change to a Limited Liability Company (LLC). An LLC offers increased liability protection.
There may be occasions where an LLC needs to change its entity too. For example, changing to a Corporation may help attract more high-end investors.
How do I change business entities?
Changing business entities is a legal procedure that must be done properly. You’ll need to file the appropriate paperwork and seek approval from the relevant authorities. You may also need to dissolve your current entity and re-register under a new structure. Articles of Dissolution, Articles of Incorporation and Certificates of Conversion are just some of the key documents involved in the process.
What to do next?
Whether or not to change a business entity depends on your unique circumstances. Incorporating may increase your taxes but it also allows you to issue stock to raise capital. What’s important is that your chosen entity aligns with your long-term vision and goals.
Changing business entities can feel overwhelming, but it is something that we deal with all the time. We can guide you on the steps that meet your best interests. Contact us today for a consultation.