How to Transfer LLC Membership Interest

To understand how to transfer LLC membership interest, individuals must read the requirements provided in the limited liability company's operating agreement.3 min read

Transferring LLC Membership Interest

An owner, also known as a member, of an LLC owns a part of the business. This ownership is also called interest. An owner may choose to transfer his or her interest to another individual for reasons such as:

  • Leaving the business.
  • Financial purposes.
  • Personal reasons.

Usually, the LLC's operating agreement contains the requirements that oversee the transferring of an owner's interest.

The following are steps to take when determining how to transfer membership interest:

  1. Look over the LLC's operating agreement.
  2. If the operating agreement doesn't cover transferring interest, then read the applicable state laws regarding LLCs.
  3. Determine the worth of the membership interest.
  4. Complete the required tasks and paperwork.
  5. Acquire a transfer document.
  6. Sign and date the document.

When looking through the LLC's operating agreement, search for the section that discusses the qualifying reasons for transferring one's interest along with how to do so. It should also list any specific requirements or restrictions that pertain to the LLC as well as a method for calculating the worth of the owner's interest.

If the operating agreement does not discuss the details of transferring membership interest, then the state's LLC law should provide insight into what to do. If the operating agreement doesn't provide a method for calculating the value of the interest, then the owner must discuss with the other members of the LLC to determine its worth. The owner should have the LLC's financial documents and the documentation of his or her distributions on hand when meeting with other members.

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