How to Transfer My Interest in an LLC

By Laura Payet

How to Transfer My Interest in an LLC

By Laura Payet

You've worked hard getting your limited liability company (LLC) off the ground, but you've decided it's time to move on. After carefully evaluating your operations agreement, you should be able to transfer it to the new owner of your choice. There are many reasons why you may want to transfer your LLC over to someone else, and these steps can help you throughout the process.

Group of coworkers talking around a table

1. Look to the operating agreement.

An LLC is a business entity that offers the liability protections of a corporation without the complexity of a corporate structure. An operating agreement governs the relationships between an LLC's owners, typically called members, and how they run the company. It also is a contract among the members that officially states who participates in management, how to divide profits and losses, and how to handle other issues that might arise. It also governs how you can transfer your interest.

2. Follow the operating agreement's requirements.

To transfer your interest legally, you must do what the LLC's operating agreement requires. It should specify the conditions for any transfer. For instance, it might:

  • Require unanimous consent of all the members (or consent of the managing members)
  • Restrict the individuals or entities to whom you can transfer your interest
  • Permit you to transfer your interest only to the other members
  • Mandate that the other members have a right of first refusal, meaning you must offer them your interest first on the same terms as your proposed transfer
  • Prohibit any transfer that could have negative consequences for the LLC, including adverse tax effects

Whatever the provisions of your particular document, you must abide by them. Assuming the agreement permits you to transfer your interest, obtain and document any necessary approvals.

3. Determine the value of your interest.

Once you have satisfied any necessary conditions for transferring your interest, you must determine its financial value. If you plan to sell your interest, you obviously need to know the value to determine an appropriate sale price. Even if you plan to make a gift of your interest, it is important to set a value on it for tax purposes. Again, let the operating agreement be your guide. It may establish a value for the members' shares in the company or a method for valuation. If it does not, you may need to agree with the other members on an acceptable value, perhaps by factoring in the company's business and assets or by comparing it to the value of other similar companies. Alternatively, you may want to hire a valuation expert.

4. Complete the remaining documentation.

You need to execute a transfer agreement documenting the transfer of your interest to the new owner. Note that your operating agreement may specify the form for any transfer documentation. The new owner should also sign the operating agreement. It is usually not necessary to file a notice of the transfer with the state, but any subsequent annual reports the LLC submits should reflect the ownership change.

If your LLC lacks an operating agreement, or if your current one does not include procedures for such situations, now might be a good time to fix that. Consult an experienced attorney who can prepare an up-to-date, comprehensive operating agreement and prevent confusion or disputes.

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.