Can a company start out as a sole proprietorship and become an LLC later on or must it start out as an LLC?

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Can a company start out as a sole proprietorship and become an LLC later on or must it start out as an LLC?

Asked on December 8, 2011 under Business Law, Oklahoma

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

The company doesn't "become" an LLC; however, you can create an LLC, then transfer all the sole proprietorship's assets (including name, intellectual property, accounts receivable, inventory, etc.) and contracts (including leases, service agreements, etc.--subject only to any non-assignment clauses in those agreements) to the LLC. You don't even need to sell the assets to the LLC; you can make them your inivestment (an investment "in kind") in the LLC and so use them to support your ownership and capital account. An accountant could help you value them correctly for that purpose, and any business or contracts attorney could set up the LLC and handle the paperwork transferring assets.


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