Converting Your Missouri Sole Proprietorship to an LLC in 2024

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Convert Missouri Sole Proprietorship to LLC

As a small business owner in Missouri, you may have started your business as a sole proprietorship due to its simplicity and low initial costs. However, as your business grows, you may want to start an LLC in Missouri, which is more suitable for your needs. Converting your Missouri sole proprietorship to an LLC can protect your assets and optimize your business’s growth potential.

In this comprehensive guide, Webinarcare Editorial Team will walk you through the step-by-step process of Converting your Missouri Sole Proprietorship to an LLC, enabling you to make an informed decision for your business.

How to Convert your Missouri Sole Proprietorship to an LLC

What is a Sole Proprietorship and Limited Liability Company?

A sole proprietorship is the simplest and most common form of business ownership, where a single individual owns and operates the entire business. A sole proprietorship has no legal distinction between the owner and the business, meaning the owner is responsible for all the business’s debts, liabilities, and obligations. 

On the other hand, a Limited Liability Company (LLC) is a legal business structure that combines the limited liability protection of a corporation with the pass-through taxation of a sole proprietorship or partnership. This means the owners, known as members, are not personally responsible for the company’s debts and liabilities. The company’s profits and losses are reported on the members’ tax returns. We reviewed some of the Best LLC Services and provided features as an add-on with their packages for you to check out.

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Having a sole properietorship had given you freedom and comfortability, but, starting an LLC in Missouri has a lot to offer, which is why it is a highly recommended business structure. It is suggested that you speak with a legal professional first before you begin coverting your sole proprietorship to an LLC. They will understand what’s best for you and your company.

– WEBINARCARE EDITORIAL TEAM

Steps on Converting Missouri Sole Proprietorship to an LLC

To convert Missouri sole proprietorship to an LLC, you must follow the guidelines that include choosing a name for your LLC, appointing a Registered Agent, preparing for the Articles of Organization, creating an Operating Agreement, obtaining an EIN, opening a business bank account, registering for state tax and licenses, and lastly, informing clients and vendors of conversation.

Step 1: Choose A Name For Your LLC

The first step in converting your sole proprietorship to an LLC is selecting a unique and distinguishable name for your new entity. In Missouri, there are specific naming requirements and restrictions that you must adhere to when choosing your LLC’s name:

  • The name must include “Limited Liability Company,” “LLC,” or “LLC.“
  • The name cannot include words or phrases that imply the company is engaged in activities it is not authorized to conduct.
  • The name must be distinct from other registered businesses in Missouri.

In Missouri, if you do not wish to file your LLC right away but want to hold the name that you have decided on, then you can reserve your LLC name for 60 days. You must file a name reservation application in the Missouri Secretary of State to keep the name. 

You can register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire for your business. A DBA allows a company to operate under the name of the person or entity who owns it. If you have decided to file for Missouri DBA, you can file it in three methods, online, by mail, and in person filing. However, before filing a DBA, you should know that you need to renew your DBA from up to five years, which costs around $7.

You can check the availability of your desired business name by searching the Missouri Secretary of State Business Services‘s website.

Step 2: Appoint a Registered Agent

In Missouri, all LLCs are required to appoint a Registered Agent. Registered Agent is a person or entity responsible for receiving and forwarding legal and tax documents on behalf of your Missouri LLC, such as service of process, Missouri Annual Report, and state tax notifications. Your Registered Agent must have a physical address in Missouri and be available during regular business hours. In Missouri, the cost of Registered Agent usually ranges from $50 – $150.

When selecting a Registered Agent, consider their reliability, knowledge of state requirements, and ability to manage sensitive legal documents. You can serve as your own Registered Agent, appoint another individual, or hire the Best Registered Agent Service.

Step 3: Prepare and File the Missouri Articles of Organization

To officially form your Missouri LLC, you must prepare and file Missouri Articles of Organization with the Missouri Secretary of State. The Articles of Organization is a legal document that outlines essential information about your  Missouri LLC, including:

  • The LLC’s name
  • The Registered Agent’s name and address
  • The LLC’s purpose
  • The LLC’s duration (perpetual or for a specific term)
  • The names and addresses of the initial members or managers

In Missouri, the filing fee for the Articles of Organization is $105. You can submit the document online through the Missouri Secretary of State’s website or by mail. Processing times may vary, so check the website for current information.

Step 4: Create an Operating Agreement

Although not legally required, Missouri Operating Agreement is a crucial document that outlines the structure, management, and financial arrangements of your Missouri LLC. The operating agreement should include the following:

  • The roles and responsibilities of members and managers.
  • The process for admitting or removing members.
  • The allocation of profits and losses among members.
  • The procedure for making major decisions.
  • The process for dissolving the LLC.

Having a written Missouri operating agreement can help prevent disputes and ensure a smooth operation of your LLC. It is advisable to work with Missouri Business Attorney to draft an operating agreement that meets the specific needs of your business and complies with Missouri laws.

Step 5: Obtain an Employer Identification Number (EIN)

An Employer Identification Number (EIN) in Missouri, or Federal Tax Identification Number, is a unique nine-digit number issued by the Internal Revenue Service (IRS) to identify your business for tax purposes. With an EIN, you can open a business bank account, file tax returns, and hire employees.

To obtain an EIN for your Missouri LLC, you can apply online on the IRS website, by mail, or by fax. The online application process is the fastest and most convenient method, as you will receive your EIN immediately upon completing the application. There is no fee to obtain an EIN.

The application of an EIN in Missouri can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

Recommended: Professional services have the EIN included in their LLC formation package. We recommend using –

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Step 6: Opening of Missouri Business Bank Account

When converting your sole proprietorship to an LLC, separating your personal and business finances is essential by opening a dedicated business bank account. Missouri business bank account helps maintain limited liability protection and makes managing your business’s finances and taxes easier.

To open a business bank account in Missouri, you will need the following documentation:

  • Your LLC’s Certificate of Formation
  • Your LLC’s EIN
  • Your LLC’s operating agreement (if applicable)
  • A resolution authorizing the opening of the account (if required by the bank)

You can check out the Best Banks in Missouri, which offers the best fees, services, and convenience for your business needs.

Step 7: Register for Missouri Taxes and Licenses

As an LLC in Missouri, your business may be subject to various state taxes and licenses, depending on the nature of your operations. Common taxes and licenses include:

  • Sales Tax: If your LLC sells taxable goods or services, you must register for Missouri sales tax permit and collect sales tax from your customers.
  • Employer Taxes: If your LLC has employees, you may be required to register for Missouri unemployment insurance and workers’ compensation coverage.
  • Business License: Missouri Business License is a legal document granted by a state government body that permits you to conduct business within the area under its jurisdiction. The price of business licenses and permits in Missouri ranges from $50 – $300.

To ensure you comply with all applicable Missouri tax and licensing requirements, you can check out the Missouri Department of Revenue for more information.

Step 8: Inform Clients and Vendors of the Conversion

After converting your Missouri sole proprietorship to an LLC, you must inform your clients, vendors, and other business contacts of the change. Update your contracts, invoices, and marketing materials with your new LLC name, and communicate the transition to ensure a smooth and professional process.

Ongoing Compliance For Missouri LLCs

As an LLC in Missouri, you are subject to ongoing compliance and reporting requirements, including:

  • Filing Annual Report with the Missouri Secretary of State and pay the associated fee and which you can pay every 1 year (within 3 months of anniversary).
  • Maintaining accurate and up-to-date records of your Missouri LLC’s finances, meetings, and decisions. You can manage your finances using spreadsheets, accounting software, or becoming a CPA in Missouri.
  • Adhering to any industry-specific licensing and regulatory requirements.

Benefits of Converting Missouri Sole Proprietorship to an LLC

In converting Missouri Sole Proprietorship, there are benefits that you should consider. Here are the benefits you must know before converting your sole proprietorship:

Limited Liability Protection

Converting a sole proprietorship to an LLC provides limited liability protection for the business owner. This means that the owner’s assets (such as their home or car) are separate from the business assets and are protected from being seized to pay off business debts or in case of a lawsuit.

Credibility and Professionalism

Missouri LLC can help improve the credibility and professionalism of the business. Many customers and suppliers prefer dealing with an LLC, which shows commitment and stability.

Tax Flexibility

With Missouri LLC, you can choose how your business will be taxed. It can be taxed as a sole proprietorship, a partnership, or a corporation. This allows you to choose the tax structure that best fits your business and may result in potential tax savings.

Easier Access to Funding

Missouri LLC may have an easier time obtaining funding from banks and investors than a sole proprietorship. Many lenders and investors prefer to work with an LLC, as it demonstrates a commitment to the business and provides legal protection.

Ownership and Management Flexibility

Missouri LLC allows you to have multiple owners (called members) and to divide ownership and management responsibilities among them. This can make growing your business easier or bring in new partners.

Enhanced Privacy

In some states, such as Missouri, an LLC can offer more privacy than a sole proprietorship. This is because the business owner’s personal information may not be as public as it would be with a sole proprietorship.

Easier Transfer of Ownership

With Missouri LLC, transferring business ownership to another person or entity is generally easier. This can be beneficial if you decide to sell your business, bring on new partners, or plan for succession.

Continuity of Existence

Unlike a sole proprietorship, which ceases to exist upon the death or incapacity of the owner, Missouri LLC can continue to operate even if the owner passes away or becomes incapacitated. This provides stability and continuity for the business and its employees.

Compliance with Missouri Requirements

Some states require certain types of businesses, such as those in the professional services industry, to operate as Missouri LLC or another corporate entity. Converting your sole proprietorship to an LLC in Missouri ensures that your business complies with these regulations and avoids potential legal issues.

Access to Additional Benefits

Missouri LLC may be eligible for additional benefits, such as state-specific tax incentives or credits, not available to sole proprietorships. These benefits can help reduce your tax burden and support the growth of your business.

In summary, converting a sole proprietorship to an LLC in Missouri can provide significant benefits, including limited liability protection, tax flexibility, increased credibility, and easier access to funding. It’s essential to carefully consider these advantages and consult with a legal or tax professional before deciding to convert your business structure.

FAQs

What is an LLC in Missouri?
An LLC (Limited Liability Company) in Missouri is a business structure that combines the flexibility of a partnership with the liability protection of a corporation.
Can a sole proprietorship in Missouri be converted into an LLC?
Yes, a sole proprietorship in Missouri can be converted into an LLC.
What are the advantages of converting from a sole proprietorship to an LLC in Missouri?
The main advantage of using an LLC in Missouri is the limited liability protection it provides, shielding owners from the company’s liabilities and debts.
How is an LLC in Missouri taxed?
In Missouri, LLCs can generally choose to be taxed as a sole proprietorship, a partnership, an S corporation or a C corporation.
How do I change my business to an LLC in Missouri?
To switch from a sole proprietorship to an LLC in Missouri, you need to file articles of organization with the Missouri Secretary of State.
Is a lawyer required to file for conversion in Missouri?
Technically, you don’t need a lawyer to convert your business to an LLC in Missouri, since you can file the paperwork on your own using online services or the Secretary of State’s website.
How long does it take to convert a sole proprietorship to an LLC in Missouri?
Depending on how you file, converting a Missouri sole proprietorship to an LLC may take several weeks or more.
How much does it cost to convert a sole proprietorship to an LLC in Missouri?
The cost of incorporating an LLC in Missouri is generally between $100 and $500 depending on how you do it
What documents do I need to file to convert a sole proprietorship to an LLC in Missouri?
To file for an LLC in Missouri, you’ll need to prepare and file articles of organization with the Missouri Secretary of State.
Can I change the name of my business when I convert to an LLC in Missouri?
Yes, you can generally change the name of your business as part of the process of converting it to an LLC in Missouri.
Do I need to get new licenses and permits when I switch my business to an LLC in Missouri?
You may need to secure new business licenses, permits, and tax IDs when you file for an LLC in Missouri.
How does converting to an LLC affect my business structure in Missouri?
By converting to an LLC in Missouri, your business structure changes from being a sole proprietorship to being an LLC with its own set of rules and requirements.
Can I keep my EIN when converting from a sole proprietorship to an LLC in Missouri?
Yes, you can generally keep your EIN (Employer Identification Number) when you convert your business to an LLC in Missouri.
Am I required to have an operating agreement for my Missouri LLC?
No, Missouri LLCs don’t require an operating agreement, but they’re a good idea to have anyway as they can help outline your LLC management structure.
What should I consider before converting my business to an LLC in Missouri?
You should seek a tax attorney’s advice before choosing to organize as an LLC for potential tax implications and also consider the annual (or other tax period depending on your entity type) state filing, franchise tax, and annual registration fees, etc., if there are any.
Do I need to reapply for my Missouri business license after changing to an LLC?
You may need to reapply for a business license for certain types of businesses in Missouri after you convert your entity type to an LLC.
Are LLCs required to have liability insurance in Missouri?
Missouri doesn’t strictly require liability insurance for LLCs, but purchasing an appropriate policy can offer valuable companies assets security.
Can I dissolve my LLC in Missouri if it’s no longer right for my business?
Yes, you can dissolve an LLC you’ve started in Missouri if it’s no longer serving your business’s best interests.
How many members are required to form an LLC in Missouri?
There is no requirement for minimum or maximum members for forming a Missouri LLC, and individuals or other LLCs (for instance) can be members.
Does every Missouri LLC need an authorized agent or workspace in Missouri?
Yes, having a registered agent or sharing business workspace is mandatory in order to form and maintain a Missouri LLC.
How do I rearrange my business from a Missouri LLC back to a sole proprietorship?
If you need to check your situations where casting aside LLC formation desires, then of course, one can easily restructure back with a solo proprietor type in Missouri.
Can I choose S and/or C corporation status instead of LLC status in Missouri?
If one qualifies and be able to keep physical locations & meeting frequency documentation obligations, then conversion to either of the corporation structure tax types is allowed instead of choosing limited-liability status, especially if the tax differences can significantly offset the calculated risks.
If I want multiple owner rights, do I need to convert my sole proprietorship to an LLC in Missouri?
In a partnership arrangement in which information is governed by Uniform Partnership Act giving everyone equal voting proof portion& rights; a members-managed LLC mirrors those provisions, making conversing advantageous for multi-owner needed rights in particular to solidify such rights concerning important stuff like disintegrations cases or future funding development undertakings.
Can converting your business from a sole proprietorship to LLC change your federal tax classification and rates?
Yes, part of this conversation should be with a tax professional and having year-end/31st of March tasks about taxation review confirmed, whereas certain state-level filings will report any tax obligation variances.
Do all employees need to sign paperwork to change business entities in Missouri?
Regulating documents primarily require the implicit approval of all shareholders/unit ownership members. Follow-up worker consent may be present concerning any immediately ascertaining enterprise employment rule tactics change right.
How can I know whether an LLC structure or any other businesses’ approach might be the best to form a company revolving around strictly online platforms with e-commerce in Missouri?
Online startups and sole proprietor doing businesses show many as of limits profit potential as they increase, trans-for in mo have created methods to help lower structural entity costs through vest technical ingenuity. Also, seeking either expert advice, or basic partnership paperwork for shared ownership structure will better assist/prevent conflicts between partners and perfect execution of the firms plans that show benefits exponentially.
Do business partners or employees without ownership rights receive special treatment in an LLC?
If a multiparty entrepreneurial approach is part of legal items discussions an LLC agreement, everyone will have equal voting power concerning different needed company determinations.
Can converting to an LLC be the solution for both reducing risk and improving credit in Missouri?
Organizing as an LLC entity shields members’ personal assets from credit determinations not encompassed by deposit accounts & non-necessary ways; similar to credit protection while investing/accumulating valuable savings over time both for projects and emergencies outside of outside employer protection borders.
What is the process of converting my Missouri sole proprietorship to an LLC?
To convert a Missouri sole proprietorship to an LLC, you need to file articles of organization with the Missouri Secretary of State.
Do I need a lawyer to convert my Missouri sole proprietorship to an LLC?
No, it’s not required to hire a lawyer to convert a sole proprietorship in Missouri. However, it’s recommended to have a lawyer when making major legal decisions.
What is the cost to convert my Missouri sole proprietorship to an LLC?
The filing fee to convert a Missouri sole proprietorship to an LLC is $50. Additional fees may apply, such as initial franchise taxes.
Can I convert my Missouri sole proprietorship to an LLC online?
Yes, Missouri allows LLC formation online through their Secretary of State website.
What is the difference between a Missouri sole proprietorship and an LLC?
The main difference between a sole proprietorship and an LLC in Missouri is that an LLC offers limited personal liability protection for business owners.
Do I need a new EIN when converting my Missouri sole proprietorship to an LLC?
No, you don’t need a new EIN when converting your sole proprietorship to an LLC in Missouri. You can use the same EIN you had for your sole proprietorship.
Will my business name change when I convert my Missouri sole proprietorship to an LLC?
You can keep your business name when converting your Missouri sole proprietorship to an LLC, but it must include the words “Limited Liability Company” or “LLC.”
Can I convert my Missouri sole proprietorship to an LLC if I owe taxes?
Yes, you can convert your Missouri sole proprietorship to an LLC even if you owe taxes. However, the state could ban future business operations if tax debts are not resolved.
How long does it take to convert my Missouri sole proprietorship to an LLC?
It takes about 2-3 business days to process the filing of the articles of organization to form an LLC.
What is the minimum number of members required for an LLC in Missouri?
Missouri allows single-member LLCs, which only require one member.
Can I be the only member of my LLC in Missouri?
Yes, Missouri allows single-member LLCs.
What kind of taxes does my Missouri LLC need to pay?
LLCs in Missouri are subject to state income tax and federal taxes. They are also subject to sales tax and other local taxes.
Does an LLC in Missouri need to file an annual report or franchise tax?
Yes, Missouri LLC must pay a $10 franchise tax annually. They also have to file an annual report.
Are there any other ongoing requirements for Missouri LLCs?
Yes, Missouri LLCs must keep proper records, attend regular meetings, and keep their financial accounts updated.
Can an LLC be managed by a third-party administrator in Missouri?
Yes, Missouri allows third-party administrators to manage an LLC.
Can I have a foreign LLC in Missouri?
Yes, Missouri allows businesses domiciled in other states to register their existence as a foreign LLC in Missouri.
Is there a residency requirement to have an LLC in Missouri?
No, LLC members or managers don’t have to be residents of Missouri.
Can I change my LLC operating agreement after it’s filed in Missouri?
Yes, LLC operating agreements can be amended at any time after filing them in Missouri with the state.
What is the personal liability protection limit for Missouri LLCs?
In general, the LLC members’ personal liability in Missouri is limited to their investment in the company.
What is the statutory agent for an LLC?
The statutory or registered agent is the person or business designated to receive important papers on behalf of the LLC.
Does my Missouri LLC need a registered agent?
Yes, all LLCs in Missouri must have a registered agent located in Missouri authorized to accept legal papers to them.
Do I need an attorney to act as my registered agent in Missouri?
No, you don’t need a lawyer to act as your LLC’s registered agent in Missouri.
Are there any restrictions putted on foreigners for creating an LLC in Missouri?
No, any foreigners aged 18 years or older and have valid IDs or passports can create an LLC in Missouri.
Can an LLC in Missouri be formed for a specific period only?
No, LLCs in Missouri can only be planned for an indefinite lifespan.
Can a Missouri LLC have unlimited regular members?
There’s no maximum number of members an Missouri LLC can have.
What happens if the LLC members owed money in Missouri?
LLC members’ personal assets are protected in Missouri which protect their money from creditors. But still, in some cases, the lien may permit the lien holder gain access the percentage profit.
Can Missouri LLC owners be updated later on during the schedule?
Yes, members or managers can be added or removed from the Missouri LLC at any time.
Can I change my Missouri LLC name later on?
Yes, at any time you can change your LLC’s name by filing an amendment of articles or form for change of name in the secretary of State.

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Conclusion

Converting your Missouri sole proprietorship to an LLC is a significant decision that can provide valuable benefits, such as limited liability protection, tax advantages, and enhanced credibility. Following the steps outlined in this guide and consulting with legal and financial professionals, you can successfully navigate the conversion process and position your business for future growth and success.

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