If I’m planning to convert my sole proprietorship to an LLC but have unpaid loans at this point, will I have to pay those off prior to conversion or can my LLC take on those loans?
Get Legal Help Today
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
If I’m planning to convert my sole proprietorship to an LLC but have unpaid loans at this point, will I have to pay those off prior to conversion or can my LLC take on those loans?
What’s the best way to approach in this situation?
Asked on February 3, 2016 under Business Law, Washington
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 8 years ago | Contributor
Your LLC cannot "take on" those loans: you cannot assign (or transfer) liabilities, like the liability to repay a loan, so whomever currently is liable to pay the loans (presumably yourself) will still be liable to repay them. Certainly, your LLC can help you pay the loans (like a friend or family member could), but at the end of the day, you will remain liable for them.
You don't have to pay them before creating a LLC. And your sole proprietorship is not "converted" into an LLC; rather, you create an LLC which you can start conducting business under, but that's new legal entity you created; the sole proprietoship does not become it.
IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.