How to Change Ownership of a California LLC

By Michelle Kaminsky, J.D.

How to Change Ownership of a California LLC

By Michelle Kaminsky, J.D.

California law dictates the default procedure for making changes in LLC ownership, but specific provisions in the company's operating agreement or articles of incorporation often provide otherwise.

Businesswoman and businessman looking over document together

Regardless of the how the LLC must proceed to add or remove owners, who are also known as members, you must report all changes of ownership in a California LLC to the Secretary of State.

1. Review the LLC's formation documents.

Most LLC operating agreements or articles of organization include the required voting procedure for adding or removing members to the company. If the LLC has its own provisions regarding the timing of a vote and the number of votes required to make changes in ownership, continue as directed.

If the LLC does not have such provisions for adding members, California law requires that a majority of current LLC members vote to approve the addition of a new member.

Regarding removal, in the absence of other provisions in the LLC's operating agreement or articles of incorporation, the member seeking withdrawal from the LLC must supply to the remaining members written notice of their intention to leave.

2. Download and fill out a Statement of Information form.

California requires LLCs to report changes in company membership to the Secretary of State. You can do this by filing a Statement of Information (Form LLC-12). California LLCs have to file one of these annually anyway, so if you have not yet filed for the year, you can simply include the updated member information.

You may submit this form online along with the required fee.

3. Update other documents and accounts as needed.

If your articles of organization or operating agreement include the names of all LLC members, you will need to update those with the new information.

If you amend your operating agreement, you do not need to file anything with the Secretary of State because California does not require LLCs to file operating agreements at all. In this case, you should get the signatures of all members on the new document and keep it on file.

If you amend your articles of incorporation, however, you must notify the Secretary of State by filing one of two forms, Amendment to the Articles of Organization (Form LLC-2) or Restated Articles of Organization (LLC-10).

The difference between the two is that if you file the former, your original articles of incorporation will still be available as part of the public record, whereas if you file the latter, the newer version replaces the older articles of incorporation entirely.

You may file these forms, along with the appropriate fee, by mail or in person.

Be sure to also update all of the LLC's tax and banking information to reflect the changes in membership. For example, if the departing LLC member had the authority to sign checks, you should remove her from the account.

Finally, consider notifying the company's creditors and customers, particularly if the changes in LLC membership could affect them and/or their rights.

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