You’ve formed your LLC, but now you want to make changes to your LLC’s members (owners). How do you do this?
The following is intended to describe the process for removing or adding members to your LLC.
First, before describing the process for change, it is important that you understand the authority of an LLC. Members are the owners of the LLC. If your LLC is managed by the members (this is usually spelled out in your articles of organization – The document filed with your state to create your LLC), then the members have all authority to make changes to the LLC, including adding or removing existing members.
If you are instead managed by managers, a separate hierarchy of people distinct from the members, then it is the managers (not typically the members) who have the authority to change the membership of the LLC.
Be sure if your LLC removes a member (owner) that it has an agreement to do this with that member. As a rule, you generally cannot just remove a member from an LLC without their agreement.
01 Changes Internally
When you add or remove members to an LLC, you are making the change internally. In other words, this is not done through some public filing, it is done privately, and most often the LLC’s operating agreement. For instance, if an LLC wants to add a member, a new operating agreement would be created listing the new member and all the member’s ownership percentages, and all members (including the new one) would sign.
02 File With Your State?
Once a change is made to an LLC, such as changing the members, it is not commonly a requirement that it file anything with the state right after the change has been made. In fact, most states typically require that changes such like this be reported once per year as part of the annual report filing. So, unless your state specifically says otherwise, you do not have to “report” anything until your normal annual report is due.
Need a Public Record of Change
What if you need a public record of the change in members? For instance, what if a new investor in your LLC wants to be sure that he/she is in fact listed as a member of the LLC and the annual report is not due? In cases like these, where you have to do some sort of public filing, you usually have the following possible choices:
1. File Annual Report Early – If you can, your best choice is to file the annual report earlier than its due date. Most states will allow this, within certain parameters. If this is an online filing, just try and file the annual report now, reflecting the changes to the LLC’s members. If it is accepted, then you found the best solution, since you didn’t have to pay any additional fees. If you cannot do this online, you may need to contact your state directly and ask if this option is possible or, if the next option is possible.
2. Amended Annual Report – With this option, you will Re-file the LLC’s annual report, but this time with the new information. Check with your state to see if this option is available.
3. Amend Your Articles of Organization – Your last option to make your changes public is to file articles of amendment with the state. This generally shouldn’t be considered unless the other options above are not available. For instance, in Arizona, because there are no annual reports for LLC, this would be the only way to make the changes public. If you need assistance with this filing, you can order this online by clicking here.
03 More Information
Need more information about this subject or about your state’s requirements?
Others have found the following other pages on our website helpful:
State Filing Requirements – Find your state’s filing requirements, cost to keep your entity, find the forms you need to file, or find out how to contact your state agency for more information.
o Florida – Changing members of a Florida LLC
o (coming soon) – We will be posting new pages, with specific “How To’s” in each state. Return to this page or to smallbiz.com/howto in the future.