How to Change LLC Ownership

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methods

1Amending Your Articles of Organization

2Drafting a Buy-Out Agreement

3Dissolving the LLC

Other Sections

Tips and Warnings

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References

As the owner of a business organized as an LLC, an opportunity may arise for you to change the ownership structure. For example, a business partner may decide they no longer want to be involved in the business, or you may meet a new partner who wants to join. How you change your LLC ownership depends on whether your LLC's Articles of Organization has a provision that addresses adding or dropping LLC members. In some cases, you may have no choice but to dissolve the original LLC and create a new one.

Steps

Method 1

Method 1 of 3:

Amending Your Articles of Organization

1. 
   1
   Review the buy-sell provision of your Articles of Organization. A buy-sell provision describes how to add new members to your LLC. It also provides terms that allow your LLC to continue to operate if one of the founding members wants to part ways with the company.

   • If you were originally the only member of your LLC, you may not have included a buy-sell provision in your Articles of Organization. You have the option of drafting a separate agreement, or dissolving your LLC and forming a new one with your new partners.
   • Carefully follow the steps laid out in your buy-sell provision. Pay close attention to timing, since many buy-sell provisions include specific procedures for providing notice to other members.
   • If you had an attorney draw up your Articles of Organization, you may want to consult with them on how to follow the buy-out provision and change the ownership of your LLC.
2. 
   2
   Check state law if your Articles of Organization lacks a buy-sell provision. All states have laws that govern changes in LLC ownership. You generally must follow these default rules unless your Articles of Organization covers changes in ownership.

   • In some states, you must dissolve your LLC and create a new one if you want to change LLC ownership and you don't have a buy-sell provision in your Articles of Organization.
   • Other states may provide statutory exit mechanisms that enable a member of the LLC to leave, provided the LLC can continue to operate without that member. Consult an attorney if you're unsure about the law that may govern your particular situation.
3. 
   3
   Complete your Articles of Amendment. Most states have a form you can fill out to amend your Articles of Organization. Check on the website of your state's Secretary of State for a form you can download, or call the Secretary of State's local office.

   • These forms typically are relatively straight-forward, fill-in-the-blank forms without a lot of legalese. You usually don't need to consult an attorney to complete and file an Articles of Amendment form.
4. 
   4
   Sign your Articles of Amendment. All owners should sign the Articles of Amendment stating that they have agreed to the proposed change in ownership. This includes any new owners as well as any who will be leaving the business.

   • Some states may require your signatures to be notarized. If the form includes a notary block, take the form to your local notary public to complete the signature process.
5. 
   5
   Register the change with your state's Secretary of State. Some states require changes in ownership of LLCs to be registered with the state's Secretary of State. Check with the Secretary of State's office to find out if registration is required.

   • Generally, expect to register a change in LLC ownership if your state requires you to file a copy of your LLC's Articles of Organization.
   • Even if your state doesn't require changes in ownership to be registered as a general rule, you still may have to register new owners with various licensing authorities. For example, if your business has a liquor license, you typically must get a license for the new owner and pay any required fees.
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Method 2

Method 2 of 3:

Drafting a Buy-Out Agreement

1. 
   1
   Search online for templates. If you want to draft your buy-out agreement on your own, you may be able to find a template online that you can download for free. You can also purchase templates online, or at an office supply store.

   • Make sure any template you use is valid under the laws of your state.
   • Avoid simply copying the provisions of a template if you don't understand what they mean. They may not apply to your situation. Get help from an attorney or small business expert if you're unsure.
2. 
   2
   Consult an attorney. An attorney can help ensure that your buy-out agreement will accomplish what you want it to do. Even if you decide to draft your agreement on your own, you may want an attorney to review your draft.

   • Getting help from an attorney is particularly important if there are large amounts of money at stake. Each current or future owner may want to seek their own representation.
3. 
   3
   Meet with the incoming or outgoing owners. Everyone involved with the change in ownership needs to go over the draft of the buy-out agreement. You want to make sure everyone understands how the change will take place and what their role will be.

   • There may be differences of opinion that need to be negotiated. Once you're all in agreement, you may have changes that you need to make to your draft.
4. 
   4
   Finalize your agreement. Once everyone involved with the change in ownership is on board with the buy-out agreement, print up the final draft. Proofread carefully before you print the copy that everyone will sign.

   • If necessary, you may want to have an attorney look over the final agreement. Other owners may want to have their own attorneys look over the agreement as well to make sure their interests are adequately protected.
5. 
   5
   Sign your agreement. Everyone involved with the change in ownership must sign the buy-out agreement. In some states, you may be required to sign the document in front of a notary. Even if not required, you may want to have the signatures notarized for additional legal protection.

   • All owners who signed the agreement should have their own copy. Keep the original in a safe place along with your other business records such as your Articles of Organization.
6. 
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   Record your agreement with your state's Secretary of State if required. Some states require any buy-out agreements to be filed with the Secretary of State. Even if filing the agreement isn't legally required, it can often be a good idea to file it anyway. That way there is a formal record of the agreement if other copies are destroyed.

   • In most states, you can file any documents related to your business organization and formation with the Secretary of State for a nominal fee.
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Method 3

Method 3 of 3:

Dissolving the LLC

1. 
   1
   Review your Articles of Organization. If your Articles of Organization doesn't have a buy-sell provision, it may have a clause that requires the dissolution of the LLC if there is a change in LLC ownership.

   • For example, suppose you had a single-member LLC and used a standard template to create your Articles of Organization. It probably includes a clause that states that you must dissolve your LLC if you sell it to someone else or add different partners.
2. 
   2
   Complete your Articles of Dissolution. The Articles of Dissolution are a legal document you file with your state's Secretary of State if you need to dissolve your LLC to change the company's ownership. Typically the Secretary of State's office will have a form you can fill out.

   • In some states this form is called a "Certificate of Dissolution." There may be other forms required as well. Check with your state's Secretary of State to determine exactly what documents you need to file to properly dissolve your LLC.
3. 
   3
   File your Articles of Dissolution with your state's Secretary of State. Once your Articles of Dissolution are complete, submit the document to the Secretary of State's office for approval. You typically must pay a fee when you file this document.

   • Check the website of your state's Secretary of State or call the office to find out the amount and methods of payment accepted.
   • In some states, you may be able to complete the articles of dissolution form online and dissolve your LLC with the state electronically.
   • When the Secretary of State's office has approved your dissolution, you'll receive notification. You may also receive an official certificate of dissolution at this time.
4. 
   4
   Follow your state's rules for closing out the business. Dissolution is just the beginning of the process of dissolving your LLC so you can create a new one. Even if your new LLC will be taking over all of the debts and obligations of your old LLC, you still need to notify creditors and file a final tax return with the IRS.

   • Because LLCs are created under state law, you need to follow the steps outlined in your state's laws that govern LLCs. If you've registered your LLC to do business in more than one state, you may have to follow different requirements in each state.
   • The office of your state's Secretary of State will have information on how to properly dissolve your LLC. You may also be able to find out this information on the office's website.
5. 
   5
   Create a new LLC as the successor to your old one. The new LLC will take over the assets and unpaid debts or other obligations of the LLC that you dissolved. You typically must get a new tax ID number, and you may have to create a different name for your new LLC than your old one.

   • Include provisions about the assets and debts of the old LLC in the Articles of Organization for your new LLC.
   • Consult an attorney if you have questions or concerns about establishing the new LLC as a successor to your old LLC.
6. 
   6
   Register your new LLC with your state's Secretary of State. Your new LLC must be registered using the same process you used to register your old LLC. In some states, you're required to file your Articles of Organization as well.

   • Check the website of your state's Secretary of State, or call the office ahead of time to find out the fees for registering a new LLC. Expect them to be several hundred dollars.
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Tips

• If your LLC is registered to do business in more than one state, check filing or registration requirements for changing LLC ownership in all states where your LLC is registered.
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