How Do I Add Another Owner to My LLC?

By Rob Jennings J.D.

The passage of time can bring about waves of change in the operations of any business. Shifts in market conditions, operational costs and your own life circumstances can create a situation in which you find it advantageous to bring in new talent. When the business in question is a limited liability company (LLC), you must take certain steps to add a new owner, or "member." Doing it right will help you avoid negative tax consequences and preserve the limited liability protection that led you to organize as an LLC in the first place.

Step 1

Review your operating agreement, specifically the sections pertaining to adding a new member to the LLC. Adding a new member in violation of the operating agreement will not only get you in hot water with the other members, but in a best case scenario it will endanger the limited liability shield in the event of a lawsuit against the company. Your operating agreement may require a meeting and vote, written consent or spoken consent of all or a majority of members. If the agreement is silent as to the manner of consent, draft a simple document stating that the members intend to add this specific new member as of this specific date. If you have no operating agreement at all, you should get one at this stage.

Step 2

Amend your operating agreement to add the new member to the LLC and bind her to the provisions of the agreement. While you may draft an entirely new operating agreement, it may be sufficient to simply execute an amendment. Identify the date of the original agreement and the parties, state the date the members agreed to add the new member, and specify the sections of the original operating agreement to be amended and how they are to read now. Don't forget to classify the new member's interest. A managing member will have the right to participate in management and operations, but a non-managing member will be entitled only to a share of the profits. This difference has important tax ramifications.

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Step 3

Amend the articles of organization that you filed with the secretary of state or corporations when you organized your LLC. Most states have a simple form for you to fill out and submit. Indicate all changes in membership, membership interests, addresses, business purpose or registered agent for service of process. The fee for amending your articles of organization varies from state to state and should be listed on the website for the secretary of state or corporations in your jurisdiction.

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How to Add an Entity to an Existing LLC

References

Related articles

Adding Partners to an LLC

A limited liability company, or LLC, may be formed with any number of partners, called members. New members may be added for a variety of reasons, such as wanting more capital to grow the business, needing someone with expertise in a new business area, or replacing a member who has retired or resigned. The requirements for adding a new partner depend on whether the LLC has one or more members, and the state where the LLC is registered.

How to Amend an LLC Filing

As your limited liability company grows and changes over time, you may determine that you need to amend your filings. Amendment may also be required if you discover that you made a mistake on your original filing. Generally, you only need to file an amendment when making significant changes to the LLC and altering the articles of incorporation. Following the correct steps for amendment will ensure that the state is updated with accurate information about your company.

Can I Change an LLC From Members to Managers?

A limited liability company is an independent legal entity formed under your state’s laws. If you choose to organize your business as an LLC, you must also decide whether your LLC should be managed by its members or by non-member managers. While it can be a hassle to alter this decision later, you can change your management structure after you start your business.

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