However, there are other actions that need to be taken once your company’s Operating Agreement has been changed and the new ownership/management is reflected in the amended LLC’s Operating Agreement.
Below is a checklist for updating the appropriate government agencies and other important affiliates after the changes to ownership are completed.
Your LLC’s bank will typically want a list of all the current members and managers of the LLC; remember to inform the bank about the restructured ownership, i.e., which members’ names should be removed from the list of authorized signers, and which should be added.
When the EIN is issued in the name of the LLC, the IRS will require the information of a Responsible party of the LLC. The IRS defines the Responsible Party as “the person who has a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the individual, directly or indirectly, to control, manage or direct the entity and the disposition of its funds and assets.”
If the member who is leaving the LLC was listed as the Responsible Party, the IRS will need to be informed of the change; thus the LLC should typically file IRS Form 8822-B. The IRS mandates the 8822-B Form to be filed within 60 days of the change in ownership.
If you are changing from a multi-member LLC to a single-member LLC, another issue to ponder is how the LLC is taxed by the IRS. Typically, for tax purposes, the IRS considers a single-member LLC a disregarded entity and a multi-member LLC a partnership. In order to change your company to a single-member LLC, IRS Form 8832 will need to be completed and submitted to the IRS.
Qualified as a Foreign LLC:
Many states, including Florida, Texas and Illinois, require a complete list of the members’ names and addresses to approve the application in order to qualify an LLC as a foreign LLC. This information must always be current with the states where an LLC is foreign qualified.
Annual reports in these states will allow you to update the member information once a year, during a designated filing period. If the need is more urgent, an amendment to the qualification can often be filed in order to ensure the states have the most updated list of the LLC’s members.
Contact Person for Annual Billings:
The LLC’s Communications Contact must keep an individual’s name, street address and phone number updated with its Delaware Registered Agent. This information is not provided to the state of Delaware and is not part of the public record.
If the member who is leaving the LLC was the Communications Contact, the LLC should provide a new Communications Contact to the Registered Agent immediately so as to ensure any service of process or important notices about the LLC are received. Failure to keep the information valid and up-to-date can force the Registered Agent to take drastic action, such as resigning as the company’s Registered Agent in Delaware. This will leave the company without a Registered Agent, which places the company in an inactive status.
For any questions about removing a member or amending the LLC’s Foreign Qualification to update a member, call one of our helpful formation specialists at 800-345-2677, Ext 6900. We will be glad to assist you.
THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND HARVARD BUSINESS SERVICES, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF DELAWARE’S CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.