Converting Your Sole Proprietorship to an LLC in Pennsylvania


Converting to an LLC

Many businesses start out as a sole proprietorship, or “DBA”, and later convert to another business entity type when the business grows.   Maybe the business started as a hobby, or the budding entrepreneur wanted to wait to see if his business model would work.  Often, first-time business owners are not even fully aware of the pros and cons that accompany different types of business entities, such as partnerships, limited liability companies (LLC’s), and corporations.

By this point, you may have researched how to form an LLC and the benefits of operating under Pennsylvania’s limited liability company law.  If not, we invite you to explore our previous articles on the topic.

Here, we will highlight some of the factors to consider when converting your business from a sole proprietorship to an LLC. Those factors include:

  • Timing.  Consider when will be the best time to complete the conversion, taking into account business trends and cycles, tax reporting, and licensing requirements.  Your lawyer and tax professional can help answer these questions for you.
  • Tax implications.  Usually, LLC’s enjoy pass-through tax treatment, meaning the profits will by taxed the same way they were when you operated as a sole proprietorship.  You will want to understand all of potential tax implications before making any changes.
  • Business name.  Will your business assume a new name, or will you keep the name essentially the same while adding the necessary LLC designation?
  • Pennsylvania filing and registration requirements for LLC’s, including the Certificate of Organization and a docketing statement.  Will you prepare and file the necessary documents yourself, or allow an experience Pennsylvania business law attorney to guide you through the process?
  • Ongoing obligations, including Pennsylvania’s ongoing annual reporting requirement.

One of the greatest benefits of operating as an LLC is the fact that — as the name suggests — an LLC’s liability exposure is limited to the business’s assets.  If you’ve made money from your business over time, or otherwise acquired personal assets, converting your business to an LLC will help protect your personal (non-business) assets in the event the business encounters liability issues. 

If you are considering changing your business entity type, consult with an experienced Pennsylvania business law attorney who can help you choose the right entity type and course action for you and your business.  Located in western Pennsylvania, the experienced attorneys at Scolieri Law Group, P.C. can answer these and other business law questions.  Contact us today at (412)765-0546 or info@scolierilaw.com.