Opening LLC

[Afro-Sheen]

Need advice on opening LLC.
I opened a sole proprietorship business a little more than a year ago. It has been doing well, and have been advised to open an LLC for protection (so any potential losses won’t affect my personal assets).

Question is can you convert SP to LLC or do you need to close the original one and then open the LLC (maybe DBA)?

Also anyone have experience with online selling. I was told since on original forms I did not list “selling online” in description, I would have to open a new business for that, I can’t change it now.

Any idea what type of LLC is recommended for selling apparel and accessories wholesale as well as online?

Thank you.

[SID_NY]

Re: Opening LLC

I believe you need to open the LLC first and then transfer the ownership from your SP to LLC.

Read this:

How to convert a sole proprietorship to an LLC

You have a business operated as a sole proprietorship and you want to now set up an LLC to run your business. Here’s how you do it!

You and Small Biz Are One
Keep in mind this fact: your business and you are the same, because you personally own the assets that comprise your business. You may have an EIN for the business operations, but you were the applicant of your EIN. In other words, the EIN is yours to operate the business, but there is no separation between you and your business.

LLC is a New Legal Person
When you form an LLC, you are forming a new legal person, which is separate from you. This legal person or entity will have many of the same rights as you and I have as citizens of the US: it can own real estate; it can own checking accounts; and it can own and operate businesses.

EIN – The SSN of your LLC
Because the LLC is a separate legal person, it will need its own tax identification number, just like you have a Social Security Number (SSN) which is different from each individual, an LLC will need to get its own EIN.

Time to Separate
Once your LLC is set up, it will need to set up its own bank account and then you will need to transfer the ownership in your business to the LLC. In return, the LLC will give you ownership in the LLC.

My Brother is Not Me
Still not sure how this works? Think of it this way, when you create a new LLC, it’s like having a brother. You and your brother are close but you are two different people. If you sell your brother your business and he now owns and runs the business and the business assets, if someone gets injured from the business, who are they going to sue; you or your brother? Obviously, your brother!

This is same concept when it comes to an LLC. Because the LLC is a separate person and the LLC will be the owner and operator of the business, you will no longer own the business, the LLC will. Consequently, if the business causes injury, the owner of the business is the one who is liable and that would be the LLC.

Beware
Even if you take action and set up an LLC and transfer your business to an LLC, you may still be personally liable for the LLC’s actions. Be sure you take the proper steps to make your LLC “bullet proof” to lawsuits, and keep your LLC compliant with its state’s rules.

Can I convert my existing business to an LLC? - Nolo.com

Can I convert my existing business to an LLC?

Yes. Converting a sole proprietorship or a partnership to an LLC is an easy way for sole proprietors and partners to protect their personal assets without changing the way their business income is taxed.
Some states provide a simple form for converting a partnership to an LLC (often called a “certificate of conversion”). Sole proprietors and partners in states that don’t provide a conversion form must file regular articles of organization to create an LLC.
In some states, before a partnership can officially convert to an LLC, it must publish a notice in a local newspaper that the partnership is being terminated. And in all states, you’ll have to transfer all identification numbers, licenses, and permits to the name of your new LLC, including:

• your federal employer identification number
• your state employer identification number
• your sales tax permit
• your business license (or tax registration), and
• any professional licenses or permits.

As far as your second question is concerned i.e, “Also anyone have experience with online selling. I was told since on original forms I did not list “selling online” in description, I would have to open a new business for that, I can’t change it now.”
I dont think its true at all. You should still be able to sell online without any issue.

I’m sure @prototype @Eastern_Dresses and other enterpenuers in our forum should be able to help. Good luck!

[Afro-Sheen]

Re: Opening LLC

Thank you Sid_NY, that is very helpful.

[Eastern_Dresses]

Re: Opening LLC

@SID_NY

I’m sure @prototype @Eastern Dresses and other enterpenuers in our forum should be able to help. Good luck!

I am sorry not really sure about the legal aspects of opening an LLC.

Something that i do know though is that if you want to have an ecommerce site that accept payment online through credit card, you’ll need to apply for a merchant account. This is something your web developer is not going to do for you and you’ll have to apply it on your own using your business’ details.

If you are in US you can go for Authorized.net for your merchant account, for UK I am only familiar with Realex Payment and for Australia it would be Stripe.

If you only want to give paypal as an option, you’ll need their merchant account as well unless you want the customers to be able to order only one product at a time, in that case you can use paypal button only.

[Afro-Sheen]

Re: Opening LLC

Thank you Eastern Dress for your response. I am in the process of getting the information on the ecommerce site. At the moment it seems the cost may be more than I am willing to pay per transaction. This is only one bank I checked so far so need to do more research. I am not sure why the lady told me I need to open a seperate business to sell online (eBay, Amazon not my own site yet). I am getting different answers when I call. I need to do more research on something concrete.

[Mrs_Saieen]

Re: Opening LLC

You can convert fromSP to LLC. and make sure you choose the right tax structure so you're not paying unnecessary amount of taxes