To transfer LLC ownership, the current member signs an assignment of their membership interest to the new owner, the members approve the change as the operating agreement requires, and the company updates its records, state filings and IRS information. The transfer can be a full sale, a partial sale, a gift or an addition of a new member, and each one has different paperwork and tax effects.
General information only. Ownership transfers can have tax and legal consequences, so check your operating agreement and talk to a tax professional before you sign.
Start with the operating agreement
The operating agreement controls who may sell, whether other members have a right of first refusal, and what vote is needed to admit a new member. If it is silent, your state's LLC act sets the default, which is often that new members need the other members' consent.
Types of ownership transfer
- Full sale of the company: the entire interest passes to a buyer.
- Partial transfer: a member sells or gifts a percentage and stays in the company.
- Adding a member: a new person is admitted, often by buying in or contributing capital.
- Transfer on death or divorce: governed by the agreement and by state law.
Step-by-step process
1. Agree on terms and sign an assignment
Prepare an assignment of membership interest that names the seller, the buyer, the percentage transferred and the price (or states it is a gift). Include the date it takes effect.
2. Get member approval and amend the operating agreement
Record the approval and amend the operating agreement to list the new ownership percentages. Without an update, the document no longer matches reality, and banks may ask for it.
3. Update state records if required
Some states list members or managers on the public record, others do not. If yours does, file an amendment or the next annual report with the new information. Our US company ownership change service covers this.
4. Update the IRS responsible party
If the person who controls the company changes, the IRS must be told within 60 days using Form 8822-B.
5. Update the bank and contracts
Give the bank the new documents and update any signers, licenses, payment processors and contracts that name the old owner.
Tax effects to watch
- Single-member to multi-member: adding a member to a single-member LLC generally changes it to a partnership for tax purposes, with a Form 1065 filing. Ask whether a new EIN is needed.
- Multi-member to single-member: see our guide on changing from MMLLC to SMLLC.
- Non-resident owners: a foreign owner may have additional reporting, such as Form 5472 for a foreign-owned single-member LLC.
- Gain on sale: the seller may owe tax on a gain. This depends on the seller's tax status and the assets of the company.
Frequently Asked Questions
Can I transfer LLC ownership without a lawyer?
For a simple transfer between agreeing parties it is often possible, using a written assignment and an updated operating agreement. For larger transactions or disputes, legal advice is worth the cost.
Do I need to file anything with the state?
It depends on the state. Some states record members or managers publicly and need an amendment. Many do not require a filing for a change of members.
Do I need a new EIN after a transfer?
Often not for a simple sale of the whole company, but a change in tax classification can require one. Confirm with a tax professional.
Can a non-U.S. person buy a U.S. LLC?
Yes. Foreign owners can own U.S. LLCs, but they should plan for the IRS reporting that applies to foreign-owned entities.
How long does it take?
The paperwork can be signed in a day. Bank, IRS and state updates take longer.
Need the paperwork handled? See our US company ownership change service.
