The business world is full of opinions about the question of whether it is better to buy the individual membership interests in an LLC as opposed to forming a new LLC and purchasing the assets of the existing one. Your decision to use one or the other method is a personal choice that may depend on your individual goals or the goals of your business and what you are trying to accomplish with it.
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Contact the manager or members either directly or through the registered agent of the LLC. Begin negotiations for the buyout through your attorney. An attorney will review the operating agreement of the company as well as any existing business leases or contracts, then perform lien, judgment and pending lawsuit searches to make sure you are not purchasing a bundle of liabilities disguised as a business; finally, along with your accountant, the attorney will review the finances or accounting records of the existing LLC to make sure everything is in order.
Agree upon a purchase price for the membership interests, prepare or have your attorney prepare the articles of amendment, assignment of membership interests and any other necessary documentation to complete the sale. Complete the transfer by acquiring the signatures of the members upon payment of the purchase price. File articles of amendment or restated articles of organization in the office of the secretary of state or other governmental office in which LLCs are formed in your state. Depending on the laws of your state, the amendment should reflect the change in member and manager status, as well as the name of the new registered agent and his contact information.
Amend the existing operating agreement or have your attorney prepare a restated operating agreement to make any desired changes. Generally, all or a majority of the members must consent in order to amend the operating agreement. Address any changes in member buyout rules, such as rights of first refusal by the remaining members, when the agreement is amended.
File articles of merger if you currently own an LLC and wish to merge the two businesses as opposed to purchasing the membership interests of the LLC. In this event, depending on state law, articles of merger would replace the articles of amendment. One of the two LLCs will be the entity which survives the merger and its name will remain intact. The assets of the two LLCs will be combined and merged into the surviving company. File a copy of your articles of merger in the land records of any county where the merged company owned property to perfect title in the real property records.
Tips & Warnings
References & Resources
- Mikkelborg, Broz, Wells and Fryer, PLLC: LLC Business Purchase: Assets or Membership Interests?
- The Kramer Law Firm: How to Avoid Disasters in Maryland Business Purchases
- Keytlaw: What to Do When Your LLC Adds or Deletes a Member or if a Member's Interest in the Company Changes
- My LLC Operating Agreement: Amending Your LLC Operating Agreement
- Corporations Division, Secretary of the Commonwealth of Massachusetts: Limited Liability Company Information
- Texas Department of Banking: Articles of Merger
- Stahl Cowen Crowley LLC: Limited Liability Companies and Limited Liability Partnerships in Illinois
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