As seen in Forbes
AS SEEN IN FORBES
RESPECT THE SEPARATION
New Orleans attorney Amanda Butler Schley of Business Law Group recently featured in Forbes, on the quiet, unglamorous paperwork that protects everything you have built.
By Karlita, In the Spotlight 504
Amanda Butler Schley, founder of Business Law Group, was featured in Forbes this month, sharing what it truly takes to protect a business as it grows. If you have ever poured yourself into something, a shop, a studio, a practice, a dream you built with your own two hands, this one is for you.
So we sat down with Amanda to get the real answers, the ones that live underneath the legal language. Here is what she wants every founder to know.
How can I change my business structure from a sole proprietorship to an LLC?
You file Articles of Organization or a Certificate of Formation with the Secretary of State. The name varies by state but they are the same document. You will typically file in the state where you live, where you plan to operate, or in Delaware. Delaware is popular because of its business-friendly laws, well-developed court system for business disputes, and because it does not require you to publicly disclose the names of the LLC's members.
One thing people do not think about until after they file: converting to an LLC does not automatically transfer anything. Your existing contracts, bank accounts, licenses, and permits are still in your name as a sole proprietor. You have to go back and move all of that over to the new entity, which is a step a lot of people skip and regret later.
How long does it take to change from a sole proprietorship to an LLC?
In many states you can get this done the same day. Rarely does it take longer than three to five business days. Most states also offer expedited processing for an additional fee if you need it faster.
What are the benefits of changing from a sole proprietorship to an LLC?
The biggest benefit is liability protection. Once you have an LLC, your personal assets are generally protected from business creditors and judgments against the company.
I say generally because there are situations where a court will allow a creditor to pierce through the LLC and go after the owner personally. That almost always happens when the owner has not treated the business as a separate entity. The most common examples are not having a separate bank account for the business, running personal expenses through the business, or just generally commingling funds. If you want the protection, you have to respect the separation.
The other benefit people do not always think about upfront is tax flexibility. An LLC can be taxed as a sole proprietorship, a partnership, or even elect to be taxed as an S-corp, which can generate real tax savings once the business reaches a certain income level. That flexibility does not exist with a sole proprietorship.
"If you want the protection, you have to respect the separation." Amanda Butler Schley, Business Law Group
What are the costs involved in changing to an LLC?
Filing fees vary by state but are generally pretty reasonable. If you appoint yourself as the registered agent, meaning you are the person who will receive legal notices and service of lawsuits on behalf of the company, you are typically looking at under $150 to get started. If you use a third-party registered agent service, expect to pay under $500. Annual renewal fees generally run between $35 and $200 depending on the state.
The one cost people do not budget for is a properly drafted operating agreement. Technically you can operate without one, but you should not. A good operating agreement spells out how the business is run, what happens if a member wants to leave, and how decisions get made. If you skip it and something goes wrong, you will spend a lot more fixing it than you would have drafting it correctly from the start.
Anything else important about changing business structures?
Changing from a sole proprietorship to an LLC is one of the most important things a business owner can do, and it is one of the most accessible. There are almost no circumstances where a serious business should remain a sole proprietorship. The filing is inexpensive, the process is fast, and the protection it provides is real.
Converting from an LLC to a corporation is a different conversation entirely. That is a more complex transaction that involves tax implications, governance changes, and in most cases requires an attorney. It typically comes up when a business is preparing to raise outside investment, bring on institutional partners, or pursue a specific exit strategy. If you are at that stage, get counsel involved before you do anything.
Amanda Butler Schley, founder of Business Law Group
That is the whole thing, isn't it? In business, and in life. You protect what you love by honoring what it truly is.
With a second line in my step wherever the rhythm carries me, Karlita
This conversation is shared as general information and reflects Amanda Butler Schley's professional perspective. It is not legal advice for your specific situation. For guidance on your own business, consult a licensed attorney.
Read the full feature on Forbes: https://www.forbes.com/.../how-change-sole.../
@inthespotlight504
With a second line in my step wherever the rhythm carries me,
Karlita
Karla Marie “Karlita” Cochran
In the Spotlight 504 New Orleans
