How To Change Ownership Of A Limited Liability Company

Written by J. Hirby and Fact Checked by The Law Dictionary Staff  

<p>A limited liability company is a popular business structure that is authorized under state law. The rules pertaining to the formation, operation, dissolution and change of ownership of a limited liability company might differ from one state to another. Most states give the owners of a limited liability company the flexibility to create the methods and conditions under which ownership may change.</p>
<p>What is a Limited Liability Company?</p>
<p>A limited liability company is a blend of the most favorable features of partnerships and corporations. Owners of a limited liability company have the same personal liability protection associated with a corporation while enjoying the beneficial tax structure and management flexibility of a partnership.</p>
<p>Corporations are owned by shareholders and run by officers. Limited liability company owners are members and the day-to-day management of the company is handled by managers who may or may not be members. Some states, such as New York, allow the owners to designate one or more members as managing members.</p>
<p>Operating Agreements</p>
<p>The organization and rules pertaining to the finances, ownership and management of a limited liability company are contained in an operating agreement. Many states do not compel a limited liability company to have an operating agreement, but it might eliminate internal conflicts by providing an agreement as to percentage of ownership, profit and loss allocation, management responsibilities and duties, changes of ownership and other issues that might arise in the course of business.</p>
<p>Changing Ownership of a Limited Liability Company</p>
<p>Members of a limited liability company should check the operating agreement to determine if it contains procedures for the sale or transfer of a member's interest in the company. Laws and regulations pertaining to ownership changes should be checked to determine if there are special rules or filing requirements. Some states, such as New Jersey, require the completion and filing of a form with the office of the attorney general following the addition or deletion of a member.</p>
<p>The most common method of changing ownership is through a sale to other members. Frequently, the operating agreement or other written agreements between the members will specify the method of valuing a member's interest for purposes of sale to another member.</p>
<p>A sale to a third party is possible as long as it is not restricted or prohibited by the written agreements of the limited liability company. Sometimes, the sale to a third party requires the consent of the other members of the limited liability company.</p>

More On This Topic



Comments are closed.