Washington, DC asked in Business Formation and Business Law for District of Columbia

Q: Changing from sole proprietorship to LLC: do I need to get my clients to re-sign their contracts with me?

1 Lawyer Answer
Mark Oakley
Mark Oakley
  • Rockville, MD
  • Licensed in District of Columbia

A: If your written client contracts do not prohibit assignment of the contract to others (standard boilerplate provisions often are included that do), then you can simply notify all clients that you have formally organized your business as an LLC and have assigned all existing contracts to that entity. Typically you would assure them that nothing will change or affect the business relationship, you are still the one controlling the business, but they should make all future payments to the name of the new entity. If you are changing the FEIN, notify them of the new tax ID number for their accountant or tell them the FEIN remains the same if you are transferring it to the new entity. Discuss that aspect with your accountant to make sure you handle that correctly. If your contracts prohibit assignment, then ask them to reply that they acknowledge and agree to the change you are making.

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