LLC MEMBERSHIP CHANGES: Adding, Removing, and Transferring Members

Adding a member to an LLC

The process of adding a member to an LLC may involve amending the company’s articles of organization to include the new member. Depending on the terms in the agreement, current LLC members may need to vote on it for the amendment to pass. If you are a single-member LLC and add a new member, it will become a multi-member LLC, changing its tax status from pass-through to taxed as a corporation or partnership. You may also run multiple businesses under one LLC by registering DBAs (“doing business as”) or operating under one LLC name. One LLC could be a member of another LLC and be the owner of a single-member LLC. An LLC can have as many members as it needs to.

Transferring Ownership in an LLC

The rules for transferring LLC ownership get outlined in the company’s operating agreement at the time of formation; company ownership transfer can be either a sale of the business or a change in owner or ownership percentages. When the ownership transfer is a sale of the LLC, a buy-sell agreement may be necessary. An operating agreement should specify the process for ownership transfer, but if it doesn’t, you must follow state guidelines. Under some circumstances, the state may require you to form a new LLC.

Removing a member from an LLC

LLC ownership is personal property to its members. Therefore the operating agreement and state laws declare the necessary steps of membership removal. To remove a member from your LLC, a withdrawal notice, a unanimous vote, or a procedure depicted in the articles of organization may entail. The member in question of removal may need to get compensated for his share of membership interests. If a member is unwilling to leave the LLC or accept a buyout offer, you may have to take it to court.

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How to add and remove or transfer members in an LLC

When forming an LLC, it is crucial to forecast the possibility of adding members, evolving from a single member to a multi-member LLC, and downright changing your tax structure. It’s also essential to have special provisions in place for membership transfer and removal. Forming an LLC is more than just filing the articles of organization, which is why the secretary of state recommends that you seek attorney counsel to aid in the creation of your entity—eschewing numerous legal, business, and membership hurdles. Call our headquarters at (800) 603-3900 to speak to an attorney immediately for a free consultation on the best possible legal recourse and business options available to you.

We can help with your membership concerns

At Spiegel & Utrera, P.A., our skillful attorneys have formed Limited Liability Companies successfully for decades. We craft operating agreements with the special provisions required for your LLC to operate in the way you want it to, and when and if something happens, you and yours get protected to the fullest extent of the law. An LLC is a highly adaptable and formidable entity for asset and liability protection, favorable taxes, and flexible membership options—with the correct guidance.