How Do I Change a Member on an LLC in WI?

By Tom Speranza, J.D.

How Do I Change a Member on an LLC in WI?

By Tom Speranza, J.D.

A limited liability company (LLC) is one of the business entities you can form under Wisconsin law. An LLC combines the liability protection of a corporation with the flexible structure of a partnership. The owners of an LLC are known as members, and a member's equity in the LLC is called a membership interest.

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To change a member in a Wisconsin LLC, you must transfer a membership interest from an existing member to a new member by following these steps.

1. Determine the applicable transfer rules.

You can find the rules for transferring a membership interest in two places—the LLC's operating agreement and Wisconsin LLC law.

An operating agreement spells out the relationships among an LLC's members, managers, and the LLC itself. Most operating agreements include a process for transferring membership interests. If an LLC has an operating agreement, its terms usually supersede Wisconsin LLC law.

Wisconsin Law Transfer Rules

Under Wisconsin's LLC law, a member cannot fully transfer a membership interest unless all other members consent to the transfer and the LLC records the transfer in its records.

If these two conditions aren't met, the assignment of a membership interest transfers only the assignor's economic interest in the LLC, meaning the right to an allocation of the LLC's profits and losses. The assignee or purchaser has no right to manage the LLC or exercise other powers of a member, such as voting, and doesn't become liable for any of the assignor's liabilities to the LLC, such as the obligation to make capital contributions.

Operating Agreement Transfer Rules

Most Wisconsin LLCs have operating agreements that replace the standard state law rules with more detailed procedures about when and how a member can transfer a membership interest. This is especially true if an LLC is a closely held small business where each owner understandably wants some control over who the other owners are. The typical situations when an operating agreement requires certain votes or consents to complete an LLC transfer include:

  • Transfers if a member passes away or becomes disabled
  • Proposed transfers or sales of a membership interest to someone who is not currently a member
  • Transfers for financial or estate planning purposes

An operating agreement's transfer rules are often complicated—there might be a mandatory appraisal to value the membership interest, options granted to other members to buy the membership interest or participate in the transfer, or a company obligation to redeem the membership interest.

2. Obtain the required votes or consents.

Once you figure out what procedures apply to the proposed transfer, it's time to document the required votes and consents.

If the members must vote to authorize a transfer of a membership interest, the LLC can either hold an in-person meeting with the LLC's secretary keeping minutes of the proceedings or have the members sign a written consent.

If one or more specific members have options to buy the transferred membership interest or to participate in the sale, the LLC should prepare a letter with the members' signatures documenting their decision.

If the LLC itself must take some action or provide consent for a membership interest transfer, the LLC's managers or officers should sign a document confirming the consent or that the LLC has taken the mandatory action.

3. Prepare and sign the transfer documents.

If the operating agreement permits the transfer or sale of the membership interest or the other members have granted their consent to the transaction, the LLC needs the following legal documents:

  • Purchase contract for the transferred membership interest signed by the selling member and the buyer that includes the price, payment terms, and any other agreements and warranties made by the parties
  • Assignment of the membership interest signed by the current member and the new member
  • Joiner to the LLC's operating agreement signed by the new member
  • Revised schedule to the LLC's operating agreement reflecting the new list of members and the percentage ownership represented by their membership interests

If the LLC issues membership interest certificates to the members (similar to stock certificates), the LLC must also cancel the certificate held by the old member and issue a new certificate to the new member.

An online service provider can review your Wisconsin LLC's operating agreement and help you prepare the necessary transfer documents.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.