Can a sole proprietor in California converts its business to an LLC using the same dba and EIN filed?
San Jose, CA |
I've decided to convert my business to LLC, after running it for over 10 years as sole proprietorship. But I've already had a DBA filed and an EIN for my employees. Can I use the same EIN and DBA to run my LLC?
Disclaimer: The materials provided below are informational and should not be relied upon as legal advice.
You can check with the Secretary of State (SOS) to see if the fictitous business name (or DBA) you have been using is available, and you can use that name for your corporation or LLC. For name availabilty, name reservation, and rules applying to names, you may visit the SOS web site at the link below.
When you incorporate an existing business, you must take additional steps in notifying all customer and vendors that you have incorporated, and updating your new contact information and your business agreements accordingly. I would also take affirmative steps to abandon the former DBA, or transfer it to the new business entity.
Your new corporation or LLC will be assigned a new employer identification number (EIN). You should consult your own attorney to protect your legal rights.
The LLC will need to apply for its own EIN, separate from yours.
It would make sense to assign the fictitious business name (DBA) to the LLC. However, Business & Professions Code Section 17920(b) (please see the first link below) says that the FBN would expire within 40 days of such assignment (because the facts on the FBN statement would have changed), so you should re-apply for the FBN under the LLC's name.
This leads to a broader issue: It is pretty easy to set up a *new* single-member LLC on your own (please see the second link below), but in converting your sole proprietorship to an LLC, there will be much more work. Most notably, you will need:
- A properly structured and executed LLC Operating Agreement
- An agreement for assignment of all sole proprietorship assets and liabilities to the LLC (in exchange for which you will receive your membership interest)
- At-will employment agreements with your employees
- Assignment of existing customer and supplier agreements to the LLC (after obtaining the counterparty's approval, if required by the agreement)
You likely will need the assistance of a qualified business lawyer to help you with these tasks if you want them done properly.
Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.