Business Structure | Business Structure Types | Structure LLC
Are you too late to change your business structure?
When you are starting a new business, you need to pick the right business structure from the first day. However, there are situations where you will notice that you are not adhering to the right business structure after some time. This is where you will come across the need to change your business structure. In such situations, you will start wondering whether you are too late to change the business structure or not. We will share some of the most common business structure changes and help you with determining whether you are making the right choice or not.
- Switching from a Business Structure LLC
Most people start their businesses in the form of a sole proprietorship. That is the easiest way to get a business up from the ground. After you start your business as a sole proprietorship, you will realize that your personal assets are exposed to the risk of business liabilities. To shield your personal assets, you will come across the need to change your business structure to an LLC.
This type of business structure is not really a conversion. That is because a sole proprietorship is not considered an official business structure. To proceed with business structure change, you should file the Articles of Incorporation form with your state. Then you will be able to register your business under an LLC. But you should also make sure that the business name is available. If so, you can open a DBA and continue to use the same business name. No need to change titles in an llc.
- Switching from a LLC to S Corporation
Owners of C Corporation businesses are usually subjected to double taxation. In other words, your business will pay profits on the taxes. After distributing the profits, you will have to file your own personal taxes as well. if you feel that this is quite too expensive, you may think about switching your business to an S Corporation.
This is a relatively easy change to make. However, it is a time-sensitive change. You will need to inform this change to the IRS, instead of the state. That is because the business structure change will only be impacting your taxes. The process of changing business structure is named electing S corporation tax treatment. You should be filing Form 2553 of the IRS within a period of 75 days from the incorporation or 75 days from the beginning of the current tax year. To form an S corporation, the IRS would require all shareholders to be individuals, instead of partnerships or LLCs. They should also be legal residents of the United States.
- Switching from LLC to Corporation
When you start your LLC and it grows, you will consider going ahead with VC funding. However, the investors would prefer to deal with a corporation instead of an LLC. Some of the reasons include taxation benefits and stock ownership. This is where you will be able to switch your LLC to a C Corporation. The steps that you should follow for this change vary depending on the corporate laws of the state LLC. For example, you may create a new C Corporation and then make the original LLC a subsidiary of the Corporation. You need to check the exact steps on how to do it with the secretary of states office.
Business Structure Types Final word
It is better if you can start your business with the right business structure after doing some research. But if you fail to do that, you may follow the appropriate steps and enable business structure change to experience the benefits that come with it.
How to start LLC in American Samoa
Setting up a limited liability company (LLC) in American Samoa can help you establish an independent legal entity for conducting business operations and holding cryptocurrencies such as NFTs. LLCs are available in states, territories, and insular areas such as Puerto Rico and American Samoa. Also known as Limited Liability Companies, LLCs are special entities created under state laws that provide liability protection to owners involved in business activities.