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How to Transfer Your LLC Business Ownership

A group of business people discussing the transfer of LLC ownership, with a document and pen on the table.

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Thinking about how to transfer your LLC business ownership to a new buyer but have no idea where to begin? Most business owners share a partial interest or sell the entire company.

Fortunately, transferring your stake or total control of a limited liability company to someone else is straightforward. Although the task is not overly complex, you might need the help of tax experts to avoid legal pitfalls.

Ready to discover methods of transferring your LLC business ownership with proper documentation? Let’s discuss the steps more in-depth to improve your knowledge.

Transferring partial ownership of your LLC

Notifying relevant parties, reviewing the operating agreement, and following necessary procedures are ways to achieve this task. Let’s dig into the details:

Review the Articles of Organization

Most legal limited liability companies have an operating agreement that defines business procedures. It often outlines provisions for the buying and selling of LLC ownership stakes. Its purpose is to govern the business’s internal operations in a way it suits the specific needs.

When every participant signs it, it becomes an official contract binding them. It means everyone is on board with all decisions and should include management, voting, contributions, taxation, and equity split information.

Let the Articles of Organization direct you on the next steps if there are guidelines regarding sales. If it doesn’t include the information, proceed with a legal attorney.

Follow the Buy-Sell Procedures

Follow the laid-out buying and selling processes in the organization or operating agreement articles. It often requires you to draft a resolution for your part of the business sales with the necessary signatures.

Pay careful attention to the following details:

  • Sales timing because notifying other members before the transfer is crucial
  • Define your ownership stakes
  • Get approval from other members before deciding.

Notify relevant authorities

After transferring your stake in an LLC, make the following changes:

  • Give the new member a membership certificate
  • Erase your name from the owners list in the article of organization
  • Send necessary information about the sale to your state’s business registration agency.

You can notify them by providing a change of ownership notice with your annual reporting requirements. You can also file Articles of Amendment or a statement of information to the agency. 

Ensure members consent to the forms before sending them to the authorities to avoid legal liabilities.

How to transfer complete ownership of your LLC

Drafting agreements and understanding the buyer’s intent are procedures to follow when selling your stake in an LLC. Here’s an overview of the appropriate methods for successful results.

Review the operating agreement

When transferring complete ownership of a limited liability company, your first task is reviewing necessary information.

Consider checking the operating license for provisions regarding total sales of the asset. Although there is no requirement for a buy and sell agreement when creating the business, it’s crucial for sales. So get one ready before initiating sales for the organization.

Indicate what the buyer is purchasing

This step is crucial in selling your complete ownership in an LLC. It’s best to document what you’re selling to the buyer, as many might be interested only in the assets.

Reviewing provided documents helps you understand their intent and ensure smooth business transactions. You’ll know which documents to prepare to avoid wasting time.

Create a Buy-Sell agreement

The buying and selling agreement document for your limited liability company should include the following:

  • Sales timescale
  • Document detailing other members’ agreement to the sale
  • Assets included in the sale
  • Document stating the total sale
  • Other relevant documents regarding sales

Selling a limited liability company has financial, tax, and legal requirements. It’s advisable to consult a business attorney as they’re more knowledgeable about the process. Hire a professional today.

Contact the state to record the transfer

After completing the documents for the transfer of partial ownership, reach out to the business registration agency in your state.

Review all information for accuracy with your attorney and record the LLC transaction sales. Keep in mind that some states don’t allow LLC ownership transfer. Get the information required from your state website.

Notifications regarding an LLC Transfer of Ownership

Whether selling full ownership or selling partial stakes in a limited liability company, notify the following parties:

Internal Revenue Service (IRS)

You want to notify the IRS when adding an owner to a LLC or transferring stakes for tax reasons. The recent owners might require a new Employer Identification Number (EIN) for proper documentation.

Consider informing the internal revenue service about any change in responsibility. Indicate an individual’s entitlement and control level over assets. Tell them about direct and indirect funds with employee management, whether a partial or total sale, with the form 8822-B.

Financial institutions

Let your bank know that all business accounts have a change in control after transferring your LLC business ownership. Provide details of the limited liability company ownership sales to financial institutions for quick results.

States where you register the LLC as a foreign entity

Limited liability companies must register in any state they conduct business operations. It might involve different jurisdictions, especially when it’s a foreign asset.

Consulting the state business registration websites for information is a great idea. You’ll learn ways to notify them of your organizational changes properly.

Registered Agent

This professional receives formal notices, letters, and documents on behalf of the company. Inform registered agents about the change of ownership to avoid confusion with other board members in a partial sale.

Key takeaways

Sellers may advise buyers to notify other parties, such as distributors and suppliers, for continued operations. Reaching out to lenders and partners is also great after reviewing all documents regarding the business and its operations.

It’s advisable to notify board members before initiating the transaction. Ensure your documents are available and properly documented before informing the authorities of the transfer. Double-check forms for accuracy to prevent taxation and other legal issues before you transfer your LLC business ownership.

About Author

Picture of Rick Mak

Rick Mak

Rick Mak is a 30-year veteran businessman, having started, bought, and/or sold more than a dozen companies. He has bachelor's degrees in International Business, Finance, and Economics, with masters in both Entrepreneurship and International Law. He has spoken at hundreds of conferences around the world during his career on entrepreneurship, international tax law, asset protection, and company structure. Business Anywhere Editorial Guidelines

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