If you are looking to transfer limited liability corporation (LLC) ownership interest in Wyoming, know that it’s not as simple as buying and selling stock in a corporation. Corporation ownership is vested in shares, while LLC ownership is a vested interest that’s only held by members of the LLC.
There are more formalities required to form corporations, and at first, that may be cumbersome. But this initial ease of forming LLCs has its downsides. Fewer initial formalities can make it difficult to determine exactly how to transfer ownership of an LLC in Wyoming when the time comes. But it can certainly be done.
If you are considering forming an LLC in Wyoming, ZenBusiness has tools and services to help streamline the process. For more help and support, take a look at our full slate of formation and compliance services.
First Things First: Wyoming Operating Agreements
An Operating Agreement (OA) is a really important item when it comes to determining how to transfer LLC ownership in Wyoming. With no OA, LLC governance falls to state law, which might not serve your business best. An OA is used by limited liability companies to detail how the business is structured, governed, and how conflicts are settled. For LLCs with multiple members, the Operating Agreement becomes a binding contract between the members. LLCs have quite a bit of flexibility to organize the functional and financial aspects of the business within the Operating Agreement. Most Operating Agreements contain keys sections to ensure the business runs smoothly and all members understand their obligations, including:
- Clarifying ownership structure
- Manager responsibilities
- Distribution of profits and losses
- Meeting frequency
- Conflicts of interest
- Transfer of ownership interest
- Buy/sell Agreements
- Provisions for dissolution
An Operating Agreement isn’t mandatory to operate as an LLC, but it’s very highly recommended. Don’t know where to start? We offer an Operating Agreement drafting tool to help you create an OA that best suits your LLC’s needs.
How to Transfer Ownership of an LLC in Wyoming
There are two ways to transfer LLC ownership interest without dissolving the company. One is a partial transfer of ownership, which means that one member is transferring their interest, but the other members remain owners. The other is the full transfer sale of the business.
Partial Transfer in Wyoming: The Buyout Provision
When one member decides they no longer wish to retain their membership status, they may seek to transfer their interest to someone else. Operating Agreements often have “first right of refusal” provisions that allow remaining members the opportunity to buy out the existing member’s interest before it’s offered to anyone outside the company.
A member may transfer their “transferable interest,” to a third party, but the transferee won’t receive any decision-making rights. According to Wyoming law, a transferable interest is the right to receive distributions from a limited liability corporation in accordance with the business OA. But some Operating Agreements restrict whether the interest can be transferred to a third party. It’s important to take these things into consideration when determining what’s right for your LLC’s OA. In order to have ownership interest with management rights, the existing members have to agree to make the transferee a full member.
Full Transfer: Selling Your Wyoming LLC
Sometimes selling is the ultimate goal, and sometimes it’s just the right decision given the circumstances. Your Operating Agreement can detail your buy/sell procedure. All members must consent to the sale. A third party may purchase the entire LLC or just its assets. Selling a business is complicated, and it can be extremely beneficial to consult a business attorney so you know the sale is conducted correctly.
Other Possible Issues
You can’t see everything coming, and sometimes drafting your Operating Agreement requires you to think of worst-case scenarios in order to be thorough. Here are some other concerns to consider.
Death of a Member
A deceased member’s transferable ownership interest in the LLC becomes part of the estate. However, only the rights to distributions transfer. The heir will not receive management rights. It is common practice for the remaining limited liability company members to buy out the interest from the deceased member’s heirs.
Sometimes going through the LLC transfer of ownership process is more trouble than it’s worth. There are many reasons that dissolution and reformation of the business could be the best option. Depending on the financial health of the company, the morale of members, and countless other factors, dissolution could be the best option. To dissolve an LLC requires the full consent of all members.
File proper change of ownership paperwork in Wyoming
You don’t need to file a separate form to transfer LLC ownership in Wyoming, but you do need to report the change on your Annual Report. An Annual Report is a yearly update of company information. Failing to file an Annual Report is the top reason that businesses fall out of good standing. ZenBusiness has an Annual Report filing service to help you stay compliant and track ongoing filing requirements.
Contact ZenBusiness to grow your Wyoming LLC today!
LLC transfer of ownership isn’t always a smooth, straightforward process, but with some planning, it can be a lot easier. Use ZenBusiness’s template to help create a well-drafted Operating Agreement specifically tailored to the needs of your business. And remember, all LLC members must agree to these provisions. But in the end, your unique OA gives everyone a clear understanding of exactly how your company will handle any issues that come up down the road.
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?
You may sell your transferable interest in an LLC. This includes rights to distributions but not management rights.
- Can an LLC issue new membership interests?
Yes, but this usually requires the consent of all current members. In some cases, the easier choice is to dissolve and reform the LLC with a new structure.
- How do I change ownership of an LLC with the IRS?
If you’ve changed ownership of your LLC, it’s important to notify the IRS. Use Form 8822-B to notify the Internal Revenue Service of an ownership change. There’s typically a 4-6 week processing period.
- Can an LLC member have no ownership interest?
Generally, members have ownership interests in the company with exception of someone who has been transferred rights. Unless approved by the existing members, the transferee will have a distribution interest but no management rights. An LLC can distribute ownership as it sees fit within the stipulations of the Operating Agreement.