To change a member’s ownership percentage in your LLC, you’ll need to consult your operating agreement. Your operating agreement should include the names of all LLC members as well as their financial stake in your company. What’s listed in your operating agreement is binding, so you’ll need to go through an official amendment process to make any changes.
You can determine LLC ownership percentages based not only on members’ financial stakes in the company but also on the expertise they bring and the time and effort they spend managing and working in the business. While LLC members can have different ownership percentages, the ownership interests of all members must add up to 100 percent.
The actual process to change ownership will depend on your operating agreement. Review your operating agreement on how to transfer ownership in an LLC. Depending on how you originally organized the company, an LLC transfer of ownership can be rather easy or challenging. Understand all state statutes, as LLCs are state entities. You may require unanimous consent from all members.
With an LLC, you probably won’t need to file updated paperwork with your state. But that depends on whether your original paperwork included the names and ownership percentages of your partners. If it does, you’ll need to fill out an amendment with the new names and percentages.
In this guide, we’ll walk through the reasons why you may wish to sell and how to transfer full or partial LLC ownership to another party. We’ll also cover the steps and legal requirements for an LLC transfer of ownership.
How to Change Ownership Percentages
We’ll explain importance of percentages and how to change them:
- Review founders’ agreement. This outlines initial percentages, roles and responsibilities. It should specify how to change later.
- Unless agreed, co-owners share expenses proportionally. Determine new percentage for person changing. Then determine total interests after change.
- Changing deed of trust requires signed grant deed from individual lowering interest. It conveys change in ownership. Acknowledged by notary public to be valid. Blank forms available.
- Absent member agreement, percentage has no governance or financial effect. To increase traditional ownership benefits, amend operating agreement.
- IRS treats single-member LLCs as sole proprietorships. File taxes as such.