Managing Ownership Changes for Your Delaware 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. Furthermore, adding and removing member from an LLC is comparatively easy in Delaware.
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.
Adding or Removing an LLC Member (and Other LLC Changes)
Throughout the life of your business, your company my need to add members (owners) to your LLC or remove members (owners) from your LLC to grow in a way that aligns with your goals. When that time comes, a Delaware LLC change in ownership will happen through the 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 Amendment Templates for LLC Operating Agreement
Here are some sample LLC Operating Agreement amendments you can use for your own company. Please remember that these should be customized and thoroughly reviewed to make sure they meet the specific needs of your business.
- LLC Amendment - Resignation of a Member
- LLC Amendment - Adding a New Member
- LLC Amendment - Transfer of Interest
Since there is minimal information on the Certificate of Formation filed with the state of Delaware, these amendments do not need to be filed or recorded with the state.
Your Delaware Registered Agent does not need to be informed of the LLC's change of ownership 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, adding and removing members from an LLC can be done quickly, easily and without incurring any fees.
If you're creating your initial Operating Agreement (not amending one), we have additional free templates and additional information available here.
Lastly, FinCEN, a bureau of the U.S. Department of the Treasury, now requires LLCs to report changes in beneficial ownership to comply with the Corporate Transparency Act.
Should there be any change in the information regarding the LLC's beneficial owners reported in the LLC’s initial beneficial ownership information report, it is imperative that the LLC submits an updated report within 30 days following the date of the change.
Staying ahead of FinCEN requirements ensures that your LLC remains compliant with federal regulations.
Although we don't offer a service for Fincen filings, we recommend www.FincenReport.com for assistance. They offer a platform for companies to submit beneficial ownership information (BOI), in compliance with the Corporate Transparency Act (CTA), making the process straightforward and efficient.
Alternatively, reports can be submitted directly to Fincen as well.
If you'd like to learn more about adding or removing members to an LLC, you can contact us as your Registered Agent at Harvard Business Services, Inc.
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.
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There are 19 comments left for Managing Ownership Changes for Your Delaware LLC
Linda Brooks said: Monday, March 4, 2019Hello i have a partnership LLC i would like to be removed from however i am the responsible party how do i remove myself with the state of secretary and the irs theres 2 persons myself an another we have 50/50 ownership i just want out the LLC have been in existence for 9months still pretty new..please give me info on what an how to proceed...the partnership LLC is filed with state of delaware an irs..thank you..i need help i don't know where to begin
HBS Staff replied: Tuesday, March 5, 2019Linda - 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 the removal of a member, and all current members must sign the newly amended Operating Agreement.
We will need to know if our communications contact person changes, please email our team at mail@delawareinc.com any updates or changes. They can be reached at 800 345 2677 ext 6903 a live person will answer immediately.
To change the responsible party of the LLC, you must inform the IRS. The form to change information on the LLC’s responsible party is IRS form 8822B. Instructions on how to file the change can be found on the form as well.
Carlos said: Tuesday, January 15, 2019I just formed an LLC in Delaware and I want to sell it to a friend. I can read here it's not complicated, but I'm not sure on how to proceed. What are the appropiate steps to do it, including sites to visit, forms to fill out and documents to submit? Thank you
HBS Staff replied: Thursday, January 17, 2019Hi Carlos - Since the name of the LLC members is not filed with the state, the change of ownership can typically be handled internally and should be noted on the LLC Operating Agreement (free templates above). You generally only have to file documents with the state if there is a change in the company name, company address, or Registered Agent. Please feel free to call or chat with us for specific questions.
Fernando Battaglia said: Monday, January 7, 2019How can I transfer the complete company in another people name? I need the procedures step by step. Thank you.
HBS Staff replied: Tuesday, January 8, 2019Fernando - If you have a Delaware LLC, information such as the member(s) name, address and the percentage of the business owned is generally 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. Just use one of the templates linked at the end of the post above and file the new information internally with your LLC.
Robert Muehr said: Friday, October 5, 2018This 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, 2018Great 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, 2018Hi 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, 2018Are 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.