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What legal documents are needed to document LLC ownership changes?

What legal documents are needed to document LLC ownership changes?

Q: What is a resolution in the context of an LLC?

A resolution in an LLC is a formal document that records decisions made by the members or managers. It can address changes in ownership, management, or operational procedures. Resolutions help ensure that all members are informed and in agreement about significant business decisions.

Q: Do I need a buy-sell agreement for my LLC?

A buy-sell agreement is advisable for LLCs, especially when there are multiple members. It outlines the process for transferring ownership interests, ensuring a smooth transition if a member wants to sell their share or in the event of death or disability. This agreement helps prevent disputes among members.

Q: How do I amend my LLC's operating agreement?

To amend your LLC's operating agreement, you typically need to draft a written amendment that specifies the changes. This document should be approved by the members as outlined in the original operating agreement. Once approved, the amendment should be kept with the original agreement for reference.

Q: What are authorized and issued units in an LLC?

Authorized units refer to the total number of ownership units that an LLC can issue, while issued units are those that have actually been distributed to members. Understanding the difference is important for ownership structure and equity distribution among members.

Full question:

I started my business as a single member LLC in November 2006. On December 31st 2007, I granted 7% of the business to a partner. I want to establish that the business has 100 million authorized units with only 10 million issued. Thus I have 9.3 million units and my partner has 700,000 at this point.What legal documents do I have to produce to document this? Would this be just a resolution of the LLC, or the authorized number (100 million) has to be written in the Operating Aggreement as well?

Category: LLC
Date: 04/07/2025
State: Washington

Answer:

To document the ownership changes in your LLC, you will need to amend your operating agreement and create a resolution. The operating agreement should include the total number of authorized units (100 million) and specify the issued units (10 million), along with the ownership percentages for you (9.3 million units) and your partner (700,000 units).

The operating agreement typically contains important details such as:

Company name and address
Registered agent information
Member names and addresses
Management structure
Contributions by each member and their fair market value
Dissolution date
Accounting method
Tax treatment
Sample resolutions
Appointment of officers
Final capital pay-in date

Additionally, a buy-sell agreement can help ensure the orderly transfer of interests in the LLC. Since I cannot provide legal advice, I recommend consulting a local attorney to review your specific situation and documents.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

What is an operating agreement for an LLC?

An operating agreement is a key document for an LLC that outlines the management structure and operational procedures. It details member roles, ownership percentages, and the distribution of profits and losses. This document is crucial for establishing rules and expectations among members, especially when ownership changes occur.