How To Change From A Sole Proprietorship To An LLC In 7 Steps

small business • Jun 11, 2025

Starting out as a sole proprietor is common; it’s simple, low-cost, and fast. But as your business grows, switching to an LLC (Limited Liability Company) can offer more protection, flexibility, and funding options.

Here’s exactly how to make the switch in seven straightforward steps.

Why Switch to an LLC

LLCs offer benefits that sole proprietorships don’t:

Limited personal liability: your personal assets are protected
Flexible tax options: choose pass-through taxation or corporate treatment
Greater credibility: makes you more attractive to lenders and investors

How To Switch From Sole Proprietor To LLC

Step 1: Choose A Business Name

Make sure the name you want is available in your state.
Check both:

Your Secretary of State’s database
The USPTO trademark database if you plan to register a trademark

Tip: If you're currently using a DBA (“Doing Business As”), you may need to refile or adjust it to match your new LLC.

Step 2: Designate A Registered Agent

Your registered agent receives legal documents and notices on your behalf. You can be your own agent, but many business owners use a service to:

Keep their home address private
Ensure compliance during business hours

Step 3: File Articles of Organization

This is the official paperwork that registers your LLC with the state. You’ll include:

Business name
Registered agent info
Names of organizers
Business address

Each state charges a filing fee, typically under $100.

Step 4: Draft An LLC Operating Agreement

Even if not required by your state, it’s smart to create one. This outlines:

Ownership percentages
Member responsibilities
How profits/losses are divided
Decision-making processes

Step 5: Apply For A New EIN

Once you file your Articles of Organization, you will need to apply for a new Employer Identification Number (EIN) with the IRS. It is essentially and social security number for a business. This is free and easy to do. You will need your new EIN to properly operate as an LLC.

Step 6: Open or Update Your Business Bank Account

Most banks will require you to open a new business account under your LLC. Don’t forget to:

Close your old sole prop account (after pending payments clear)
Update linked tools (like Stripe or PayPal)

Step 7: Update Liscenses, Permits & Insurance

The final step you need to take before conducting business is to apply for business licenses and permits relevant to your field. If you already have business insurance, your insurance provider may be able to change your policy into the name of your LLC. If not, you'll need to apply for another policy under the LLC. Similarly, you will likely need to file for a new business permit and license so it's in the name of the LLC.

Final Thoughts

Switching to an LLC is one of the best steps you can take to protect your business, and yourself. Once set up, you’ll gain more credibility, more protection, and more room to grow.

Need More Help? Book a 1-on-1 call with a Skip expert.