Successfully running a limited liability company (LLC) in Vermont takes a tremendous amount of hard work and dedication. It’s understandable if you want to focus all of your energy, excitement, and desire on running a profitable business instead of dealing with legal compliance issues. Regrettably, you might have to deal with certain legal issues like LLC transfer of ownership while tending to your company.
If you want to transfer LLC ownership in Vermont then you need a solid foundation in place first. Learning how to transfer ownership of an LLC in Vermont on the fly is a recipe for disaster. You could ease your burden if you have the right documents already in place when you have to transfer LLC ownership in Vermont.
In Vermont, LLC transfer of ownership is more difficult than simply buying and selling an item. The lack of formalities associated with creating an LLC complicates matters. Additionally, members own LLCs in Vermont. Transferring ownership requires their unanimous consent in many instances because members’ rights in an LLC are not freely transferable. By contrast, the owners of a corporation, i.e. the shareholders, can readily buy and sell their interest in a company.
ZenBusiness wants to take the stress of running an LLC or other small business off of your shoulders. ZenBusiness offers numerous tools that can help you when forming an LLC in Vermont. Take advantage of ZenBusiness’s tools, templates, and compliance services to help take some of the stress out of running your Vermont LLC.
First Things First: Vermont Operating Agreements
Filing the Articles of Organization with the Vermont Secretary of State forms your LLC. However, the Articles of Organization do not specify how you should run your day-to-day operations, the rights and responsibilities of your LLC’s members, or cover any other important issue that might arise during the lifetime of your LLC. Your Operating Agreement, or OA, should do that for you.
Vermont LLCs do not need a formal OA to run the business. Vermont law fills in the gaps in an LLC’s Operating Agreement or applies to all the LLC’s business if you don’t have one. But having a comprehensive and detailed OA is not only highly recommended, but can save you real headaches in the long run.
We can help by providing our Operating Agreement template. This way, you can create a thorough Operating Agreement that is specifically tailored to your LLC’s needs.
How to Transfer Ownership of an LLC in Vermont
There are two methods involving LLC transfer of ownership in Vermont that won’t automatically force your LLC into dissolution: buy/sell agreements and full transfers. You should understand each method if you transfer LLC ownership in Vermont.
Partial Transfer in Vermont: Buy/Sell Agreements
Buy/sell agreements are legal documents that delineate how a member of the LLC can sell or buy another member’s interest in the LLC. The typical arrangement involves one member selling their interest to the other members. Then, the remaining members distribute the rights and responsibilities among each other. A buy/sell agreement could exist separately from the OA. However, it’s better to include one in your OA.
A well-crafted OA addresses what to do when one member wants to leave the LLC. All members will understand the procedure if you include a buy/sell agreement in your OA. This will eliminate in-fighting and give every member a chance to protect their rights as members of the LLC.
Full Transfer: Selling Your Vermont LLC
Selling your LLC to a third party is a huge step. You want to make sure that you do it right. Therefore, enlisting the help of a highly-respected Vermont business attorney may be a wise move. Otherwise, you could make serious mistakes that could jeopardize your deal by causing an involuntary dissolution. Even if you’re only selling the assets of your LLC and not the entire business, you need to be certain that you do it correctly.
A thorough OA will have specific instructions about selling the LLC to a third party. An OA that contains information about valuation, the number of votes required to sell, and other issues will help guide you through the process. Your OA might specify that only a majority of the members need to consent instead of all members. Vermont law will give you the answer if you don’t have those specifics in your OA.
Other Possible Vermont LLC Ownership Transfer Issues
Death of a Member
The death of a member could throw your business into disarray. If that unfortunate event occurs, your OA can let your surviving members know what will happen in this situation.
Membership in an LLC is private property, just like holding shares of stock in a company. Therefore, the deceased’s spouse and children usually take the property. But, they are only entitled to distribution rights of the LLC. They don’t get voting rights or become a member automatically. Unless the surviving members add the decedent’s heir as a member, buying the interest back from the heir is the best option.
Dissolution and Reformation
Dissolving your LLC can happen because of a stated event contained in your OA or by operation of law. In some instances, dissolving the LLC and reforming it is advantageous, especially when members want to leave and withdraw their assets.
Partial transfers such as these can be incredibly stressful. That’s why dissolving and reforming the LLC can be an advantage. That way, any member who wants out is allowed to leave and new members can join the new venture.
File proper change of ownership paperwork in Vermont
When changing ownership, you need to file the appropriate paperwork with the Vermont Secretary of State. Otherwise, you could jeopardize everything that you’ve worked so hard to accomplish.
Let ZenBusiness help you plan and run a Vermont LLC
Planning how to transfer ownership of an LLC in Vermont when you’re just starting out seems like you’re setting yourself up for failure. You’re not. Instead, you can avoid massive legal battles by planning for an LLC transfer of ownership in your Operating Agreement. A comprehensive Operating Agreement will reduce the stress you feel and make any transition in your business as smooth as possible. ZenBusiness has done the planning for you. By using our Operating Agreement drafting service, you can plan for every potential problem ― including the transfer of LLC ownership in Vermont ― before it arises. If you’re looking for more help with your LLC, check out our full slate of formation and legal compliance services.
Disclaimer: The content on this page is for informational 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.
- Can I sell my interest in an LLC?
Yes. The Operating Agreement should explain how you can sell your interest in the LLC. If you don’t have an OA or your OA doesn’t address the issue, then Vermont law gives you the right to sell.
- Can an LLC issue new membership interests?
Yes. Once again, the OA explains how to add a new membership interest. Otherwise, Vermont law controls.
- How do I change ownership of an LLC with the IRS?
Direct any questions you have about your tax liability to a competent tax professional. The IRS does not require you to report ownership changes. You will need a new employer identification number (EIN) if you dissolve and reform your LLC.
- Can an LLC member have no ownership interest?
Your Operating Agreement might not permit membership in an LLC without any ownership interest. However, Vermont law might permit you to do so if you want.