How to Add an Entity to an Existing LLC

By David Ingram

Limited liability companies can have as many members as they wish, or they can have one member. Corporations can be members of LLCs as well. LLCs formally set forth the rights and responsibilities of the founding members in their operating agreement before they open their doors, but this unique business structure allows the business to add or remove members at any time. Knowing how to add an entity to an existing LLC can help to make your membership transitions flow smoothly.

Step 1

Consult your operating agreement to find the agreed-upon rules for adding or removing members. Your operating agreement may specify, for example, that adding a new member requires a consensus vote of all existing members, or it may specify the value of contributions that a new member must make when coming on board.

Step 2

Amend your operating agreement to add the new entity. Write in an amendment directly under the section of your operating agreement that lists the initial members and their initial contributions. Include all information for the new member that is included for the existing members. If you are replacing one entity with another, use the same amendment to accomplish both changes. Contact the authority governing LLCs in your state, usually the secretary of state or a division of the Department of Revenue, to determine whether operating agreements are legally required in your state. If they are, submit your amended agreement to the state.

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Step 3

Include information about the amendment to your operating agreement and the addition of the new member entity in your annual report the next time you file it. Include a copy of the text of your amendment along with information about the member.

Step 4

Download and complete IRS Form 8832, “Entity Classifications Election,” if your LLC is changing from a single-member company to a multimember company. Check box B on line 1 to specify that you are an existing entity changing tax classification. Answer the questions on lines 2a and 2b, then check “yes” on line 3. Fill in the required information about the owners on lines 4 and 5, then specify your entity type on line 6. Specify your desired start date for the classification on line 8, then fill in contact information for state correspondence on lines 9 and 10.

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