Turning your small business into an LLC can seem overwhelming and counterproductive. However, the transition can help protect your personal assets from legal issues that might turn up with your business. Here are some simple steps entrepreneurs can follow to help turn their business into an LLC.
First, you will need to register for a new business entity in the form of an LLC. You must do this whether you are in charge of an established business or a start-up because you will have to change your business structure, including your business's bank account. In order to register your business as an LLC, you will need to contact appropriate local and state government offices and fill out the forms either online or in person.
Once that step is completed, you will need to apply for a new employer identification number because you will need a new federal tax ID number for your LLC. Even if your business has been established for a while, applying for a new tax ID number will help your small business structure comply with the LLC structure and, most importantly, separate your business assets from your personal assets.
The third step is to transfer all of the old assets associated with the business to new accounts, insurances and documentation related to the new LLC you just created. This means you will need to open a new bank account to match the LLC format and transfer all the money in there, change your insurances to go with your new LLC documentation, and transfer all ownership of business items to the LLC. This step must be done even if your business is already established because the purpose of the LLC structure is to separate your personal assets from your business assets. Therefore, alterations will have to be made to existing structures within the business to make this possible, such as opening new bank accounts and starting new insurance plans.
The final step is to let customers, suppliers, and business associates know about the new structure change. Depending upon what type of business you are in, you might need to amend certain contracts, draft new contracts, or change current business relationships in some shape or form based upon the standards needed to become an LLC corporation from how the business ran before LLC status.
Remember that the key to switching to an LLC business format is to separate your personal assets from your business assets. Therefore, business with customers, suppliers, and business associates will have to match with this new agenda of separating personal assets from business assets, by keeping contracts and business relations according to LLC standards in a way that will protect your personal, as well as your business assets, as much as possible.
