Transferring an ownership interest in an Alaska limited liability company (LLC) is different from transferring ownership in a corporation. In corporations, ownership interest is represented by stock. For the most part, shares of stock are freely transferable and thus makes transferring ownership interest a lot easier.
Transferring ownership in an LLC is more difficult. In an Alaskan LLC, each member of the LLC enjoys a vested interest in the LLC. Your vested interest isn’t freely transferable. Instead, you typically need the consent of all the LLC members to transfer ownership. Beyond consent of the LLC members, there are fewer formalities when transferring LLC ownership in Alaska. The lack of formalities sometimes makes it harder to transfer your stake in an LLC than selling stock of a corporation.
Here at ZenBusiness, we can help you with many of the requirements you have to meet to run an LLC in Alaska. With ZenBusiness’s Alaska LLC formation and compliance services, you have a dedicated business partner who is always on your side. We want you to focus on your business and spend less time worrying about your administrative responsibilities.
First Things First: Your Alaska Operating Agreement
An LLC’s operating agreement (OA) is its lifeblood. An OA dictates everything that happens with the structure of the business. Operating agreements can be barebones, or they can be highly detailed. In fact, many jurisdictions like Alaska don’t require members of an LLC to draft a formal operating agreement. However, it’s generally a good idea to have one even though they aren’t legally required.
The OA outlines the default rules for LLC. An OA grants members rights and details their responsibilities. Your LLC’s OA can reflect the needs of your organization directly yet leave enough flexibility to operate the LLC successfully. Furthermore, a well-drafted OA can help protect your assets while supporting your business’s growth.
What happens if your LLC doesn’t use an OA or your OA doesn’t have a provision that specifically addresses a particular issue? Alaska law determines what happens when a dispute arises and the operating agreement doesn’t resolve it. However, if you want to avoid the legal headache of determining the rights and responsibilities of your LLC’s members once a conflict arises, then having a high-quality and detailed OA is important.
ZenBusiness can provide a template to help you draft your operating agreement. Your OA can be the means of protecting your assets, setting the rules of your organization, and assigning ownership rights as well as succession rights. Our templates allow you to control what happens to your LLC when you start it. Our services also allow you to amend your OA if your needs change.
How to Transfer Ownership of an LLC in Alaska
There are two methods you can use to transfer ownership of an LLC in Alaska and keep the business running. Those methods are partial sale (also known as a buyout) and a full entity sale. We will take a closer look at each method of LLC transfer of ownership.
The Buyout Provision
A buyout, as the name suggests, is the transfer of one member’s interest in the LLC to the other members. The remaining members then split the ownership rights, and the LLC carries on its operations.
As part of having a well-drafted and thorough OA, you might consider including a buy/sell agreement within your OA. A buy/sell agreement describes the process by which a member can sell an interest in the LLC to another member. Similarly, the buy/sell agreement will state how the other members can buy another’s share in the LLC. Having unambiguous instructions in a buy/sell agreement might make it easier for you to transfer your ownership rights or acquire others.
Having a comprehensive and detailed OA that covers buy/sell agreements is the best way to deter in-fighting among members. Moreover, a detailed OA allows a member to assert their rights fairly.
Full Transfer: Selling the LLC in Alaska
Selling your LLC as a whole is the other way you could transfer LLC ownership in Alaska. In this scenario, the LLC members sell the business entirely. However, the sale could be limited to the LLC’s assets only.
The LLC’s OA can provide the procedure for such a sale. If the OA doesn’t specify how the transfer should occur, then Alaska law will govern the procedure. However, all members of the LLC must consent to the sale if there is no governing OA.
Selling an LLC is a very complex transaction. Hiring an experienced lawyer to represent you and protect your interests will help the sale go smoothly.
Other Issues Involving LLC Transfer of Ownership in Alaska
The death of a member is a difficult situation. You might be able to make it easier if you have an OA that specifically addresses the issue. Membership in an LLC doesn’t necessarily pass to the deceased member’s heirs entirely. The deceased member’s heirs could receive the benefits and the profits left by the member but not the voting rights or any management interest in the LLC. You may consider including a provision in your OA that gives your LLC’s surviving members the right to buy out the deceased member’s share and interest.
Partially transferring an interest in your LLC might be more complicated than you thought. Dissolving your existing LLC and forming a new LLC may help you avoid those complications. You could allow new members to join as well as allow members to depart with their investment.
Your LLC is a registered entity in Alaska. Therefore, keep in mind that you have to file any changes you make to your LLC with the Alaska Division of Corporations, Business and Professional Licensing.
How to Transfer LLC Ownership in Alaska Smoothy
The key to a successful LLC transfer of ownership is to have a well-drafted and comprehensive OA. ZenBusiness’s operating agreement template could help you achieve your goals. Contact us today to learn more about how we can help you create or amend your Alaska operating agreement.
- Can I sell my interest in an Alaska LLC?
Yes. Typically, your LLC’s operating agreement will provide you with the process you need to follow. You could sell your interest to the LLC’s remaining members pursuant to a buy/sell agreement.
- Can an Alaska LLC issue new membership interests?
Adding a new member changes the membership share of the existing members. You might need unanimous approval of the existing members to accomplish this goal. An alternative is to dissolve the present Alaska LLC and reform the entity to include the new members.