When you first start your business, you choose the entity type that works best for you. The choices include a sole proprietorship, partnership, an LLC, or a corporation. However, just because you started your company that way doesn’t mean that it has to stay the same indefinitely. Things change over time, including your needs. As a result, you may want to know how to change things up in your business so that you can be better suited for success. With that in mind, let’s look at what it takes to restructure your company.
Assess Your Options
If you are thinking about changing your business structure, you first have to understand why you are moving in that direction. For example, if you first started out as a sole proprietorship but now you want to hire employees, then you can switch to either an LLC or a corporation. However, each entity type requires different kinds of paperwork, so you need to figure out what makes the most sense. Overall, here is a breakdown of what to expect from each entity:
- Sole Proprietorship: You are the only person in the company, and you have complete control. This is ideal for small enterprises that don’t need any staff.
- Partnership: You enter into business with at least one other person, and you are both financially obligated to the company.
- LLC: Your assets are protected, but you have to maintain the same number of owners to keep the LLC alive.
- Corporation: You are again protected financially, but now it’s easier to add new investors and operators to the business.
File Your Paperwork
Once you’ve determined the best structure for your company, then you have to figure out what documentation you need to switch over to the new entity type. In some cases, you may have to apply for an EIN online so that you can hire employees, and in other instances, you may have to draft articles of incorporation.
Fortunately, most of the paperwork, including the Tax ID application, is available online so that you can fill it out, pay the fees, and be on your way to a full restructuring in no time.
Finally, the last thing you should do is seek advice from legal counsel to ensure that you don’t miss anything. Overall, restructuring can be a relatively straightforward process but, don’t approach it lightly.
