All owners, or members, of a limited liability company have a percentage of ownership of the business, referred to as interest. A member might want to transfer all his interest to another person if he wants to leave the business, or he can transfer some of his interest for financial purposes or personal reasons. The transfer of a member's interest is typically governed by the requirements set out in the operating agreement.
Fit your business needs with the right LLC package
Read the LLC's operating agreement. Find the section that details what circumstances allow you to transfer your interest and what you must do, and the method for calculating your interest value, if any. Note the requirements and restrictions.
Read state laws governing LLCs if the operating agreement doesn't address interest transfer. Prevailing law governs how the transfer is done if the operating agreement fails to address the matter. Note the rules and restrictions.
Calculate the value of your LLC interest. If the operating agreement doesn't provide a method, you must meet with other LLC members to determine what your share is worth. Gather the LLC's financial records and documentation of all your distributions to help determine your share's worth.
Complete the LLC's transfer requirements, as determined by the operating agreement or state laws. For example, if the operating agreement states that the consent of all members in writing is needed, meet with all of the LLC's members and get consent in writing.
Obtain a transfer document. Check with other LLC members to see if the company has a standard form. Draft a form if needed. Check the LLC's transfer requirements or state laws to determine what specific items you must put in the transfer document. The items needed typically include your name, the LLC's name, the name of the recipient and the percentage of interest being transferred. If you're transferring all your interest, state it in the transfer document.
Sign and date the transfer document. Make a copy for your records, the recipient and the LLC. You typically give the transfer document to the new member, but check with the other members to determine if the LLC holds the original.
- Operating agreement
- Transfer form
Tips & Warnings
- Consider having the transfer document notarized.
References & Resources
- Brand X Pictures/Brand X Pictures/Getty Images