If you’ve decided to sell or transfer your LLC ownership rights in Arizona, it’s important to do it the right way. Compared to corporations, the process for transferring ownership of an LLC is a bit different. Here’s why:
In this guide, you’ll learn a few different ways to transfer ownership of your LLC in Arizona.
An operating agreement (OA) serves as the outline for how your LLC will be structured and run on a day-to-day basis. Operating agreements typically include vital information such as:
Unlike some jurisdictions, Arizona does not require LLCs to have an operating agreement at the time of formation. However, it’s a very good idea to craft one anyway because it can help you avoid many legal headaches down the road. Reasons to have an OA include:
Refer to the buy-sell provisions in your OA for guidance on how to transfer ownership of your LLC. ZenBusiness can help you by providing an operating agreement to make the process easier.
There are two ways to transfer ownership of an LLC without legally dissolving it: a partial sale (also called a buyout) or a full entity sale.
This method allows a member to sell their interest in the LLC and split ownership of that interest among remaining members. The terms of a buyout should be specified in a document called the buy-sell agreement, which determines what happens when a member wants to leave or a new member wants to join the LLC.
The buy-sell agreement typically details:
Your company’s operating agreement should include detailed provisions for buying and selling interest in the LLC. You’re not legally required to have a buy-sell agreement in Arizona, but it’s highly recommended. Having a comprehensive and clearly written OA is the best way to avoid disputes among members when you transfer LLC ownership in Arizona.
In some cases, you may want to sell the entire LLC to a third party. You’ll need to:
There are a few other common situations to consider before selling or transferring your LLC.
If a member dies, their interest passes on to their surviving spouse or children, but only as benefits (such as a percentage of profit). Heirs do not have a right to management interest in an LLC, and the remaining members may want to initiate a buyout of the deceased’s next of kin.
Dissolving and reforming the LLC may be the best choice in some circumstances. It enables new members to join and former members to leave with their share of interest.
When an LLC’s members have changed, you’ll need to file your Articles of Amendment with the Arizona Corporation Commission.
LLC transfer of ownership may seem overwhelming, but a well-written operating agreement can help the transition go smoothly. If you encounter problems with buyers or other members, seek the advice of a professional business attorney to help you resolve them.
The LLC’s operating agreement should have provisions for members who want to sell their interest in the company. See its operating agreement for sales terms and other details.
Membership interests (also called stakes in ownership) can be issued so long as all members of an LLC agree to them.
To notify the IRS of a change in ownership, file Form 8822-B, Change of Address or Responsible Party – Business. You’ll need to report new ownership to the IRS within 60 days of the change.
By definition, members are owners of an LLC and typically have some level of ownership interest. The LLC determines how interest is split among members. For example, a member may have no economic interest but still hold voting rights. This is a complicated topic, so consult an attorney for help with your specific situation.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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