I would get a tax accountant and a good business lawyer involved. You want both perspectives. And you want a very good partnership agreement. Try to imagine that something goes wrong between you and you need this agreement to protect you. Even the best of friends sometimes get crazy when it comes to business and you have to have all your ducks in a row legally before you even start.

I changed from a sole proprietorship to an LLC last year. I used the online service Nolo Press and found it to be quick and easy. If you are comfortable forming the LLC without the help of a business attorney, using an online service can be a money saver.

I switched my sole proprietorship to an LLC in my state and it was quick and easy. Because a sole proprietorship is not recognized as a separate legal entity, all I needed to do was register my business as an LLC, which cost $100. Then I had to have my attorney draw up a legal operating agreement. Because there are templates for such things that reflect the laws in your state, I was charged only $60 for the agreement. Because you will be taking on a partner, you will want to have your attorney create a partnership agreement. If you don't have a legal partnership agreement and one of you decides to leave the business, you could have problems. A partnership agreement will spell out how decisions are made, including financial decisions, and what happens to the business should one of you leave, die, or become incapacitated,

If you already have an Employer Identification Number (EIN), you may need to get a new one if either the organization or ownership of your business changes. If you incorporate a sole proprietorship or form a partnership, you must get a new EIN. http://www.irs.gov/businesses/small/article/0,,id=99903,00.html

in mmnay ways you're probably best to simply start up the LLC as a spearate entity and then either have it buy your sole trader business or simply transfer the client over to the LLC from the ST. Changing legal structure can be costly and a bit bureaucratic - if your LLC simply purchases the ST you can continue to operate with minimal disruption as I understand it. Good luck. Disclaimer: This is what I've had explained to me by a friend who had a similar experience, I haven't done it myself.

Hi smalltowngal, Here are the steps to forming an LLC. Has anyone done this before or has tips?