When to Convert your Sole Proprietorship Business to an LLC (Limited Liability Company)

Post #16: Limit your liabilities, protect your social security number, and enjoy the benefits of operating a Limited Liability Company.

In this Substack, I will walk you through the process of starting, operating, maintaining, and — if needed — selling or closing your own small business.

Today, I’m going to share the pros and cons of structuring your business as a Sole Proprietorship versus a Limited Liability Company (LLC).

Although the costs of running either of these structures are similar, the benefits of an LLC are significant if you want to:

• Grow your business with a professional and credible structure.

• Protect yourself from personal liability in case of lawsuits or debts.

• Establish a corporate veil to keep business and personal finances separate.

• Gain tax flexibility that could help reduce self-employment taxes.

• Deduct more business expenses and home office expenses.

• Build a business that is easier to sell or transfer in the future.

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👉 Subscribe to this Substack if you want to learn how to setup, operate, maintain, scale, etc… a small business. The Journey began with Post #1.

To review:

• You decided on what service or product you want to offer, and realized why you chose this one, and you made a list of ideas for potential business names [Posts 1 & 2].

• You searched for your business name ideas via web search, the Secretary of State business entity search, the US Patent and Trademark Office TESS (online search tool), DNS (for website domains), online map apps for brick and mortar business names, social media for existing handles, and WIPO’s Global Brand Database to ensure that your name has not already been claimed [Posts 3–10].

• You conducted a variety of tests to make sure that your new business name would stand out to potential customers and not cause confusion [Post #11].

• You chose the right business structure for your new business, registered your business with the local Secretary of State, registered a DBA to boost your brand, and acquired an EIN from the IRS [Posts 12-15].

Before we dive into the pros and cons, be sure to check out the previous article that describes the differences between the different options for structuring your business.

Choosing the Right Business Structure for Your Small Business

“Pros” of Upgrading from a Sole Proprietorship to an LLC

Transitioning from a Sole Proprietorship to an LLC comes with a range of benefits that can help protect your business and personal assets while setting the stage for future growth.

Here are just some of the key advantages to consider when making this decision.