Limited Liability Company (LLC) FAQ

Questions:

• What is a limited liability company?
• How many people do I need to form an LLC?
• Who should form an LLC?
• How do I form an LLC?
• Do I need a lawyer to form an LLC?
• Does my LLC need an operating agreement?
• How are LLCs taxed?
• What are the differences between a limited liability company and a partnership?
• Can I convert my existing business to an LLC?
• Do I need to know about securities laws to set up an LLC?

Answer:

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.

For general information on forming an LLC, read Nolo's article How to Form an LLC.