Change of Ownership For an LLC Is Easy in Delaware

By Brett Melson Tuesday, March 27, 2018

change of ownership for an llc Change of ownership for an LLC can be complicated and requires costly amendments in most U.S. states.

However, not in the state of Delaware. The only document required to be filed in Delaware to create an LLC is the Certificate of Formation.

Unlike other states, Delaware requires very little information to be made public in order to form an LLC.

The Certificate of Formation filed with the Delaware Secretary of State is required to contain only three items:

  • the name of the Delaware LLC
  • the name and address of the Delaware LLC's registered office 
  • the name of the LLC's Registered Agent in Delaware

Information such as the member(s) name, address and the percentage of the business owned is not required to be provided to the state of Delaware and therefore is not part of the public record. This information is kept on file internally within the LLC's Operating Agreement.

The LLC's Operating Agreement can be altered as needed by the members, without filing the changes with the state of Delaware. Some of the typical changes people make are the removal or addition of a member or the change in percentage of a member's ownership.

The LLC's Operating Agreement must be amended to reflect that a new member is now part of the LLC, or to reflect the removal of a member, and all current members must sign the newly amended Operating Agreement, but you are not required to file the amended Operating Agreement with the state of Delaware.

Free LLC Operating Agreement Templates

Since there is minimal information on the Certificate of Formation filed with the state of Delaware, this information does not need to be filed or recorded with the state.

Your Delaware Registered Agent does not need to be informed of the change either; we only need to know if there is a change to the company's communications contact, address or phone number. So, unlike many other states, change of ownership for an LLC can be done quickly, easily and without incurring any fees.

These free Operating Agreement templates, for a single-member LLC, a member-managed or manager-managed LLC, or a series LLC, can be utilized as is or customized for your LLC.

Disclaimer

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.

More By Brett Melson

There are 6 comments left for Change of Ownership For an LLC Is Easy in Delaware

Robert Muehr said: Friday, October 5, 2018

This is interesting. If there is no record at the State of who the members are, then how can anybody prove ownership? As an example, the LLC owns a residence. The sole member decides to sell the residence, with the LLC acting as the seller. How can a buyer verify that the LLC is authorized to sell the residence without having the State verify who is in charge?

HBS Staff replied: Monday, October 8, 2018

Great question, Robert. Typically, when selling an asset, such as real estate, there are supporting documents from the LLC that need to be provided to the attorney that is handling the real estate transaction. Traditionally, it is the LLC agreement; however, the process can be different depending on the attorney handling the transaction.

Jaili Nicolaou said: Wednesday, April 11, 2018

Hi there - I am an attorney practicing in South Africa. Please could you provide clarification. Your responses above seem clear but It seems bizarre that a LLC registered in the state of Delaware need not file any formal shareholding changes. we are restructuring and the shareholding in our LLC is moving to another company within the group. the original share certificate is issued by the state of Delaware so how do we obtain a new share certificate confirming the change in ownership if there are no formal filing requirements?

HBS Staff replied: Wednesday, April 11, 2018

Are you sure you're referring to an LLC? LLC's do not typically issue stocks of share and Delaware would not have issued any paperwork pertaining to LLC membership shares. Here is more detailed information on the topic:

https://www.delawareinc.com/blog/Delaware-llc-ownership-units/

https://www.delawareinc.com/blog/business-structure-llc/

If you are referring to a corporation, we can certainly help. Feel free to live chat with us via our homepage or call 1-800-345-2677 for further assistance.

 

OFR said: Tuesday, April 10, 2018

How do you change EIN numbers if you remove that members that holds it.

HBS Staff replied: Wednesday, April 11, 2018

If you’re changing the name of the member/responsible party on the account with the IRS, you will need to complete Form 8822-B and send it directly to the IRS. Also, you do not need to change the EIN number, only the name of the responsible party/member.

Daniel Duval said: Thursday, March 29, 2018

I have a Delaware LLC and Í am the sole member. Can I change the ownwership of my LLC for my irrevocable trust and what should I need to do it?

HBS Staff replied: Thursday, March 29, 2018

Traditionally, LLCs are filed in Delaware without listing the names of the members with the state.  This means changes in ownership can generally just be handled internally.  The operations and management of the LLC are governed by a written agreement among its owners that is not required to be publicly filed or disclosed to the Delaware Division of Corporations.  As a result, an LLC allows the ability to create a customized management structure, which prescribes the economic relationship among owners.  The agreement can be written in any language and is not required to be translated into English.

The Delaware LLC statute allows parties to define their business relationship in a written agreement as they so desire.  This is called "freedom of contract".  Delaware law provides rules only for those matters on which the parties have failed to agree.  The stated policy of the Delaware LLC law is to give maximum effect to the principle of "freedom of contract" and to the enforceability of LLC agreements.  The contractual flexibility offered by the Delaware Act is unmatched by any other LLC statute.

 

To read more about the LLC Agreement visit https://www.delawareinc.com/blog/101-on-an-llc-agreement/

shahid nadeem said: Friday, November 18, 2016

HI I WANT TO OWN 100% SHARE OF MY COMPANY

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