can i change my business structure?
Written by Law on Call Staff |Reviewed by Daren Harris |Last Updated March 30, 2026
The structure you choose for your business affects taxes, liability, ownership, and growth opportunities. As your goals change, you might switch structures.
Changing your structure requires checking state rules, filing paperwork, paying fees, revising licenses and contracts, and more. We show you how.
Main Takeaways
- Many businesses start as a sole proprietorship or partnership and later switch to an LLC or corporation as they grow or their goals change.
- Common reasons to change include liability protection, tax benefits, attracting investors, and supporting business growth.
- To change your business structure, check state rules, file the proper paperwork, update your EIN if needed, and revise licenses, permits, and contracts.
Five Steps to Change Your Business Structure
If you plan on changing the type of business entity you operate, here’s how you do it legally.
1. Choose Your New Structure
Start by deciding which structure best fits your business goals. Common options include a sole proprietorship, partnership, LLC, or corporation. Consider factors like liability protection, taxes, ownership flexibility, and long-term growth plans. For example, many small businesses move from a sole proprietorship to an LLC to gain personal liability protection. It may help to speak with a legal or tax professional before making the switch.
2. Check State Requirements
Each state has its own rules for changing a business structure. Review your state’s filing requirements, fees, and naming rules before moving forward. Some states allow a simple conversion, while others require dissolving the old entity and creating a new one. Checking these requirements early helps avoid delays and ensures your new structure is legally recognized.
3. File the Required Paperwork
Once you know the correct process, submit the necessary forms to your state’s business filing office—usually the Secretary of State. Depending on the change, you may need to file documents such as Articles of Organization, Articles of Incorporation, or conversion paperwork. Be sure to pay any filing fees and keep copies of all submitted documents for your records.
4. Update Your EIN
After changing your business structure, review whether your federal tax identification number needs to be updated. An EIN is used by the IRS to identify your business for tax purposes. In some cases, you can keep your current EIN, but in others you’ll need to apply for a new one.
You usually need a new EIN if you switch your business from a sole proprietorship or partnership to a corporation or LLC, or if there are ownership changes. It’s best to check the IRS rules to see what applies to your situation.
5. Update Licenses, Permits, and Contracts
Finally, update any business licenses, permits, contracts, and bank accounts to reflect your new business structure. Keeping your records consistent helps prevent legal or tax issues and ensures your business continues operating smoothly under its new structure.
Why Change Your Business Structure?
Think your business structure is set in stone? Think again. As your company grows, your needs grow too. Many businesses start as a sole proprietorship or partnership and later upgrade to an LLC or corporation to get stronger legal protection, smarter tax strategies, and more flexibility for growth.
For example, entrepreneurs often convert to an LLC or corporation when their revenue increases, when they want to protect personal assets, or when they plan to bring on investors or partners. Other businesses change their entity structure during mergers, acquisitions, or expansions into new markets.
What to Consider Before Changing Your Business Structure
Switching your business structure can offer benefits such as tax advantages, enhanced liability protection, and greater opportunities for growth. However, it’s important to ensure the new entity aligns with your long-term goals.
Before changing your business entity, consider:
Future plans: If you plan to raise capital, hire employees, or expand operations, a new structure may provide better flexibility.
Taxes: Different structures are taxed differently, which can impact profits and reporting requirements.
Liability protection: Entities like LLCs and corporations can help protect your personal assets from business debts and legal claims.
Administrative requirements: Corporations and LLCs typically involve more paperwork, compliance, and record keeping.
Everything your small business needs.
common types of business entities
Choosing a business structure is an important step. Each type affects your taxes, liability, and how your business is run, so it’s important to know the basics before you decide.
Sole Proprietorships
A sole proprietorship is the simplest and most common starting point for someone launching a new business. If you’re earning money from activities like freelance graphic design or mowing lawns and have not formally registered a business entity with your state, you are considered a sole proprietor by default.
Partnerships
A partnership is a business structure in which two or more people agree to run a business together. Each partner contributes something of value such as money, property, labor, or skills, and they share in the profits and losses of the business.
LLCs
An LLC, or limited liability company, is a common business structure in the U.S. that protects owners’ personal assets from business debts. It can have one owner (single-member) or multiple owners (members), and offers flexible management. LLCs can own property, enter contracts, sue and be sued, and hold assets in their own name.
Corporations
A corporation is a legal business structure that exists separately from its owners. This type of business entity has many of the same legal rights and responsibilities as a person. A corporation can enter into contracts, own assets, sue and be sued, and pay taxes in its own name.
Many of the world’s largest companies operate as corporations, including Starbucks, Apple, and McDonald’s. Corporations also provide limited liability protection, which means the owners, called shareholders, are typically not personally responsible for the company’s debts or legal obligations. Because of their structure, corporations are often used by businesses that plan to grow, raise investment, or issue stock.
Frequently Asked Questions
For many small businesses, converting to an LLC is one of the most common transitions because it offers liability protection while keeping management simple.
Sometimes. If your business ownership or entity type changes significantly, the IRS may require a new EIN. Minor changes may allow you to keep your existing number.
Costs vary by state and the type of conversion. Fees may include state filing fees, legal assistance, and updates to licenses or registrations.