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
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.
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!
Recommended Books on Sole Proprietorships and Corporations:
- Choosing the Right Legal Form of Business: The Complete Guide to Becoming a Sole Proprietor, Partnership, LLC, or Corporation
- LLC vs. S-Corp vs. C-Corp Explained in 100 Pages or Less
- Legal Guide for Starting & Running a Small Business
- Legal Forms for Starting & Running a Small Business
Article originally published March 2006. Updated on January 21, 2012
- What is Incorporation?
- Choosing the Legal Structure of Your Business
- Incorporate Your Business: Why and Where
- How to Start an Online Incorporation Service
- Advantages of S Corporations