The Alabama Road Builder - Summer 2016 - 18
Steps to Changing
Your Business Structure
By Mariama Bramble
here are many reasons to consider a business structure change. With a different business structure, would your business be more successful? Could your
sole proprietorship or partnership use more liability protection? Do you want to
avoid excessive fees and bookkeeping requirements for your LLC or corporation? If
your answer to any of these questions is yes you may want to reconsider your business structure. If you are considering a change to your business structure, be sure to
understand all of your options and weigh the pros and cons of a switch.
Your business structure determines the
amount of regulatory paperwork you have
to file, your personal liability for business
decisions and how you are taxed on your
business income. Sole proprietorships,
partnerships, limited liability companies,
and corporations are examples of popular
business structures. It is important have an
understanding of each before you make the
decision to change your current structure.
Businesses typically change their legal
structure because of a change in business
need. That might mean a need for more
or different business liability, growth in
your business, etc. Sole proprietorships and
partnerships enjoy simple management and
operations. LLCs and corporations enjoy
limited liability to their personal assets.
If you are considering a switch, first
reassess the pros and cons of your current
business structure and weigh the importance of the following five characteristics
to your business:
* Fees and Forms
* Investment Needs
* Operational Continuity
WHAT TO EXPECT:
Changes in Business Operations
From Sole Proprietorship or Partnership to LLC or Corporation
If you (and your partner) make the decision to change your business structure, your business will change from unlimited personal liability to limited.
Expect to file more paperwork, including your articles of incorporation and
bylaws. Fees and expenses will also increase.
From a LLC or Corporation to Sole Proprietorship or Partnership
Changing from an LLC or corporation to a sole proprietorship or partnership is more difficult. If you own a corporation, you must first convince
shareholders to get on board with the plan and liquidate your business assets.
As an LLC, you only will see changes in your tax obligations if you file as a
corporation. You will need to adhere to specific state policies like licensing
requirements and inform the IRS to the change, as your filing requirements
* File a DBA with your government agency: www.sba.gov/starting-business choose-register-your-business/register-your-business-name
* Register with the IRS. You will most likely need to apply for a
new Employer Identification Number (EIN): https://www.sba.gov/
* Register with Local and State Agencies.
* Reapply for Licenses. Some states require you to reapply for licenses when
your business structure changes: https://www.sba.gov/starting-business/
* Notify your bank and insurance company of the change. Your bank
may require you to transfer assets. Also, make sure you inform everyone
you do business with, including suppliers, customers and employees, if
the change affects them in any way.
This article appeared on www.SBA.gov/blogs and has been reprinted by permission.
Table of Contents for the Digital Edition of The Alabama Road Builder - Summer 2016
INDEX TO ADVERTISERS/ADVERTISERS.COM
EXECUTIVE DIRECTOR’S MESSAGE
HOW BUSINESSES CAN PREPARE FOR THE NEW OVERTIME RULE
SPRING FLING 2016 HIGHLIGHTS
ENGAGING OUR NEXT GENERATION OF INDUSTRY LEADERS
4 STEPS TO CHANGING YOUR BUSINESS STRUCTURE
5 WAYS TO BUILD TRUST IN A BUSINESS
PRODUCTS AND SERVICES MARKETPLACE
HEARD ALONG THE HIGHWAY
The Alabama Road Builder - Summer 2016