How to Transfer Ownership of an LLC to a Corporation

By Michael Butler

Limited liability companies and corporations are both governed by state law. LLCs have members who own the company and corporations have shareholder owners. If you are a member of an LLC, you might be able to transfer your ownership interest in the LLC to a corporation. It depends on your state, the provisions of your LLC agreement, and the purpose of the limited liability company.

Limited liability companies and corporations are both governed by state law. LLCs have members who own the company and corporations have shareholder owners. If you are a member of an LLC, you might be able to transfer your ownership interest in the LLC to a corporation. It depends on your state, the provisions of your LLC agreement, and the purpose of the limited liability company.

Step 1

Read your state's Limited Liability Code Agreement. Some states mandate that an LLC is dissolved when a member leaves, if the LLC has not designated otherwise. In other words, the default position is dissolution, but any LLC can arrange otherwise. If required, make sure that your LLC has an agreement not to dissolve if one member transfers his interest. If the LLC does not exist, you can't sell your interest in it to a corporation.

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Step 2

Read the definition of "person" in your state's Limited Liability Code to make sure that it includes corporations. LLC members must be persons as it is defined by the code.

Step 3

Read any particular state statutes regarding the purpose for which the LLC was formed. States generally allow licensed professionals, such as lawyers or doctors, to form LLCs. However, states generally don't allow corporations to practice law or medicine as only a "natural person" can receive a license to practice these fields. Natural person is the legal way of saying "human being." Thus, corporations typically cannot own membership in LLCs formed to practice medicine or law.

Step 4

Negotiate a price for your share of the LLC. Determining a price for an LLC is difficult and often depends on the nature of the business. You should consider hiring an accountant to make sure that you are receiving a fair price for your share of the business.

Step 5

Draw up a bill of transfer for your LLC membership. Sign it and have an authorized representative of the corporation sign it.

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How to Draft an LLC Agreement

References

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