Essentials of an LLC Transfer of Ownership Agreement Sample
If you feel like it’s time to sell, leave, or change ownership of your limited liability company (LLC), you can do it with a simple transfer of ownership document. You may be wondering whether you need a transfer of ownership agreement sample to help you complete the transfer as effortlessly as possible.
DoNotPay will tell you everything you need to know about the transfer of ownership in an LLC in this article!
A limited liability company (LLC) is a specific business structure in which the owners have a reduced financial responsibility in case of the company’s debts or liability. The company has to be registered with the Secretary of State in the state where the LLC operates.
Sometimes, members have to transfer the ownership in an LLC. An ownership change can happen when:
- A member:
- Passes away
- Gets a divorce
- Becomes disabled
- Exits the company
- A new member enters the company
- The owners decide to sell the business
Two main ways to transfer ownership of an LLC are:
- Transferring partial interest—if you don’t want to sell the entire business and you don’t have full ownership
- Selling an LLC—when you’re transferring ownership of the entire business to someone else
The change of ownership process depends on whether there is a change in the ownership percentage or the whole LLC is being transferred to a new owner.
Creating a limited liability company involves signing an operating agreement. It outlines rules and regulations within the LLC and specifies the duties and financial obligations of the members and managers in the company.
The operating agreement typically has a provision, called a buy-sell provision, that addresses the procedure for transferring ownership of the LLC to existing or new members. Some LLCs have a separate document that outlines this process.
The business valuation method of selling an entire LLC is usually not included in the buy-sell provision of the operating agreement.
Members of the LLC have to complete different steps depending on the percentage of the ownership they are transferring. Take a look at the table below for more details:
|Types of Ownership Transfers in an LLC||Member Duties|
|Transferring a partial interest in the ownership to existing or new members||
|Transferring complete ownership (selling an LLC)||
You don’t need a transfer of ownership agreement sample to complete the transfer. You must follow the rules of a buy-sell provision of the operating agreement. The clause should outline the following:
- How to value the purchase price—LLC members should set a mechanism for establishing what the purchase price of the membership will be. That can be done in a couple of ways, including:
- Setting the amount upfront
- Establishing a formula for calculating the buyout price
- Agreeing on an independent appraiser who will set the value
- What can be purchased—Owners can set any rules that work for them, like whether:
- Only the current members can purchase an interest
- Existing members and the LLC have the right to a first refusal
- The interest can be sold directly to the third party
Your best bet when transferring ownership of an LLC is to consult an experienced lawyer. They can draw up the agreement for you, help you manage the sale, and guide you through the transfer process.
Still, selling the entire LLC has to be done just like any other formal business ownership transfer and typically requires a bill of sale—and DoNotPay can help you with that!
If you’re transferring the entire ownership of an LLC, you need to complete the process with a bill of sale. Use DoNotPay to create this legal document and learn how to write many more contracts from business, real estate, or personal areas.
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