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
OFR said: Tuesday, April 10, 2018How do you change EIN numbers if you remove that members that holds it.
HBS Staff replied: Wednesday, April 11, 2018If 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, 2018I 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, 2018Traditionally, 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.
HI I WANT TO OWN 100% SHARE OF MY COMPANY
Robert Miller said: Sunday, October 16, 2016In 2008, an individual claimed on Wikipedia that he bought all interest in an Delaware LLC. He has used this claim to make demands to vendors. Can anyone just claim to transfer / take ownership of a Delaware LLC and not file the transfer with the State? I paid for the history of this LLC.Please explain. In other states, a change off ownership must at least be filed within a time limit. Best Regards
HBS Staff replied: Wednesday, October 19, 2016Since the members are not listed or on file with the State of Delaware the changes are made internally in the LLC agreement. The LLC agreement amendments are recorded and kept on file internally in the LLC. When it comes to making an ownership claim or transfer, clients typically work with an attorney.