[WSBARP] Sole Proprietorship to LLC

[Craig Gourley]

Timothy, your client will need to apply for a new contractor’s license and switch their insurance and bond over to the LLC.  If they have vehicles they need to go to the DOR to get a waiver form so the DOL does not charge them use tax when they change entities. Email DORcompliancedealerdeclarations at dor.wa.gov<mailto:DORcompliancedealerdeclarations at dor.wa.gov>.  Because the LLC is assigned a new UBI I am not sure you can just switch or update existing accounts with the various state agencies like L&I etc.  If you have employees I believe you need a new EIN.

From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Robert Pampell
Sent: Monday, April 6, 2020 4:51 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] Sole Proprietorship to LLC

Timothy,
A sole prop is not a business entity, but rather a business style, if you will.  Your client, therefore, is currently just self-employed.
To change business forms, you just form a new LLC.  The client will get a new UBI, but can keep the existing EIN. He/she should be able to amend the existing WA business license with DOR. The same goes, I believe, for the L&I registration.
The. LLC needs to be set up properly, with an LLC operating agreement even as a single member LLC.  You should run through the checklist of how to properly operate the LLC so as to maximize the asset protection, as it is far from perfect in a SMLLC.
Finally, an accountant should analyze whether it makes sense to do the S Corp election now and can also get the books set up correctly.
Bob Pampell

Sent from my One+ 6T Phone (Android)



On Mon, Apr 6, 2020 at 2:18 PM -0700, "Timothy Lehr" <timothy at stileslaw.com<mailto:timothy at stileslaw.com>> wrote:
All,

Question for corporate/business attorneys out there. A small(ish) construction business (general contractor) with 2 employees and about $70k in assets (equipment, vehicles, etc.) currently operates as sole proprietorship. PC wants to change to LLC for liability and tax purposes. In WA, you cannot “convert” from SP to LLC, like you could for S Corp into LLC. It seems the best way to do this is to form LLC, begin switching all licenses, business assets, accounts from SP to LLC, then to dissolve SP at the end of the year and continue business as LLC. Is this the most efficient way to accomplish the end goal? It may very well be…

But are there other ways that attorneys are advising clients to change from SP to LLC while still conducting business?

Thanks,

Timothy C. Lehr
Attorney at Law
Stiles Law Inc., P.S.

p:   360.855.0131
e:   timothy at stileslaw.com<mailto:timothy at stileslaw.com>
w:  www.stileslaw.com<http://www.stileslaw.com>

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