There can be a big gap between what you expected to happen with your business and what actually works for your company. Particularly for first-time entrepreneurs, starting a business can be very unpredictable.
When you first start the company, you will choose the business form that you think will be the smartest choice for your circumstances. However, you may eventually realize that you chose the wrong form. For example, you may recognize that a sole proprietorship does not give you enough protection if you want to expand your company to a wider customer base.
Can you change the legal form of your business, or do you have to shut it down and start a new company?
You can alter the form your business takes
Companies change, grow and shrink all the time. The state has to work with them to help them remain in business and able to contribute to the economy, so there are already rules in place about changing your existing business’s form.
You do not have to completely close the business and start fresh if you know you need to change the legal structure of the company. With the right paperwork, you can potentially change the company without any interruption to its operations. The original structure and new form will determine what steps you must fulfill. For example, if you want to turn a partnership into a sole proprietorship, you will need to comply with your agreement with your partner regarding the buyout process.
Reviewing your company’s current circumstances and original documents will help you when adjusting the legal form your company takes after you already have a functional business.