Changing the Owner of a Florida LLC
Changing the Owner of an LLC
It’s not uncommon to need to change the owner of an LLC during its lifespan. It doesn’t mean that the owners or the business failed in any way. This can happen when one of the original partners leaves, when adding new members, or when selling the LLC. How the LLC is transferred depends on whether you’re changing the names and ownership percentages or if you’re selling the entire business.
Changing Membership with an Operating Agreement
You might already know that LLC owners are known as members, with each member possessing a percentage of the company. This percentage is called a membership interest. These membership interests are transferred when changing ownership or taking on new members.
Changing the Owner of an LLC in this instance is governed by the company’s operating agreement. Chances are that yours includes some sort of buy-sell or buyout provision, or maybe your LLC has a buy-sell agreement separate from the original document. In either case, these provisions and agreements usually provide a way for deciding on the value of the business and membership interests. This is also where you can go to find any limitations on membership, whether the departing member must sell their shares and the procedure for approving a transfer of ownership.
Changing the Owner of an LLC Without an Operating Agreement
If your LLC lacks an operating agreement, then any membership transfer will be governed by the Florida Revised Limited Liability Company Act. The Act, thankfully, still allows for much of the same flexibility that LLC owners have come to expect. Under its rules, a member may depart at any time. If their conduct negatively impacts th ebusiness, they can also be forcibly removed by the other members’ unanimous consent or by judicial order.
Selling an LLC
Another way to go about changing the owner of an LLC is to sell the business. Like most transactions, you can’t sell your LLC or its assets if you don’t have someone willing to buy it. Once you’ve found a potential buyer, both of you will need to agree on what the pricing will be. If you are having a difficult time reaching an agreement, consider bringing a business valuation expert. These experts appraise the value of companies and their assets. The opposing parties will have a hard time claiming bias against an objective third party. You will then want to memorialize any terms of sale in a memorandum of understanding or a term sheet before drafting up a standard contract.
Be sure that you understand any financial, taxation, or legal consequences of the sale before finalizing anything. As always, we recommend speaking with an experienced business attorney.
Looking to start a business or grow your current business? Contact FL Patel Law today by visiting our website or calling (727) 279-5037.