How to Change from Sole Proprietorship to Corporation

January 23, 2012 | By | Reply More

QUESTION on How to Change from Sole Proprietorship to Corporation

Hi! I had recently formed a sole proprietorship which I want to restructure as a Corporation. I have determined that it would be more beneficial for myself and the business if I change the structure to a corporation but I have no idea what I’ll have to do to get that done or where I’ll have to go. Also, we have a contract done as sole proprietorship but I want to change the full structure to a corporation. Please help me on how to change my business from sole proprietorship to corporation. Thank You

– Dinesh – West Virginia




ANSWER

Dear Dinesh:

Many entrepreneurs begin with a sole proprietorship, which is to say that they begin by doing business as the single owner of an unincorporated company.

As such, a sole proprietorship is not a registered legal entity that is separate from its owner and therefore cannot technically be “changed” or converted to a corporation (or a limited liability company, for that matter).

Instead the sole proprietorship would cease to exist, and you would form a new corporation to conduct business.

worker on phone

Corporations are formed at the state level by filing the Articles of Incorporation with your Secretary of State. The Articles of Incorporation (also referred to in some states as the “Certificate of Incorporation”) is the document that serves as the charter of the corporation. It includes such details as the corporation’s name, purpose of the corporation and stock structure, as well as other information as required by the laws of the state of incorporation. You may prepare and file the Articles of Incorporation yourself, or you may hire an attorney or incorporation services company to do this for you.

Most states require corporations to designate a registered agent to receive service of process and legal notices on behalf of the corporation. While the majority of states require the registered agent to be physically located in the state of incorporation, West Virginia does not. The registered agent (or “agent of process”) of a West Virginia corporation may be located inside or outside West Virginia and may be an officer, director, employee, other individual or corporate service company.

Information on incorporating in West Virginia can be found at the West Virginia Secretary of State’s official Web site at http://www.wvsos.com/

You will probably want to draft a new contract for any formal business agreement entered into by the corporation. Consult an attorney if you have questions regarding the validity or enforceability of any existing contracts.

Good luck with your new business!

Chrissie Mould

Recommended Books on Sole Proprietorships and Corporations:

 

Article originally published March 2006. Updated on January 21, 2012

 

Chrissie Mould

Chrissie Mould has over a decade of experience in business administration and startup business consulting. She has helped launch companies in multiple industries and has managed corporate administration and governance for public and private companies. She is an incorporation specialist with MyNewVenture.com LLC. The company provides low-cost incorporation services to entrepreneurs and small businesses.

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Category: Business Structure, Q & A

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