Key Takeaways

  • LLC ownership changes in Washington require internal documentation and possible state filings depending on the nature of the change.
  • The LLC's Operating Agreement is critical to guiding ownership transfers and should be updated accordingly.
  • Changes involving buyouts, member departures, or additions often require a signed amendment and formal vote.
  • The Washington Secretary of State generally doesn’t require updates on ownership unless there is a change in governors or registered agents.
  • Tax implications, consent requirements, and business licenses may need review during ownership transitions.
  • Professional legal assistance is recommended to ensure compliance with Washington law and protect all members' interests.

If you want to know how to change ownership of a business in Washington state, you'll file an amendment form with the state and pay any required fees.

Making Amendments in Washington State

If you need to make amendments to your limited liability company (LLC), you'll submit a completed Amended Certificate of Formation form by mail, in person, or via fax. The form goes to the Secretary of State. If you're unsure whether restatement or amendment is the right choice for your particular situation, you should call the Secretary of State office.

You won't be able to change the following using this form:

  • Managers
  • Members
  • Business address

You'll pay a $30 filing fee to make amendments. If you submit via fax or want expedited service, pay an additional $50. If you mail your form, send it to the Corporation Division of the Secretary of State Office.

When an Ownership Change Requires State Notification

Although the Amended Certificate of Formation in Washington does not allow you to directly update the LLC's members, some changes might still require notifying the Secretary of State:

  • If the ownership change results in a new governing person (manager or member-manager), you must update the public record using the Annual Report or an initial report.
  • Changes to the registered agent or principal office address also require a separate Statement of Change form.
  • Ownership changes that involve the sale or reorganization of the LLC might necessitate a new UBI (Unified Business Identifier) number or updates with the Washington Department of Revenue.

To maintain compliance, always cross-check whether a change impacts public filings, especially if the new owner is assuming a leadership role or if structural changes impact licensing or tax registration.

How to Change LLC Ownership

You may need to change your LLC's ownership for a number of reasons, including the following:

  • Member's death
  • Addition of a new member
  • Sale of the company

You have to make the change official across the whole organization. Otherwise, a departing member's liabilities could cause major problems for your company.

Generally, the first place to look to for processing any changes is your operating agreement. This document usually contains terms for buy-sell provisions, which outline situations in which ownership changes.

Common reasons — in addition to ones listed above — for these changes include the following:

  • Member retirement
  • Divorce settlement
  • Legal reasons
  • Judgments

If you don't already have a buyout agreement or buy-sell provision outlined, you should create one. Without it, you may end up suffering the unwanted dissolution of your business. Although one member may want out of the business, that doesn't mean all of the members want that.

You may have an attorney draw up the provision for you, or you can use a pre-written template, where you fill in application information. The main thing is making sure you clearly state buyout terms to prevent any issues in the future.

If you don't create these provisions or agreements correctly, member liability may still exist. For instance, say one of your members doesn't want to help any longer with business operations or no longer receives profit sharing. Inactivity doesn't automatically equal no longer being a member. The member could file for bankruptcy later on, and if the courts find the member still has an ownership interest in the company, your LLC could pay that member's personal debts.

You can find templates online, and most buyout agreements have some components in common. You should clearly identify the involved parties and include everyone's contact information. You should also outline each member's unit ownership the value of it. Make it clear if the member is being bought out or relinquishing him- or herself.

Once the buyout agreement is complete, update your certificate of organization to reflect the changes. The member who releases ownership should turn in his or her member certificates. Provide any new members with a certificate with the valuation of interest.

If you're not bringing in a new member and the company holds the remaining interest, you should either split the interest between remaining members or retain the units in the LLC until they can be issued later.

Steps for Transferring Ownership Interests

To legally and effectively transfer ownership in a Washington State LLC, follow these general steps:

  1. Review the Operating Agreement: Confirm the terms for transferring membership interests, such as member approval requirements or right of first refusal.
  2. Draft a Membership Interest Purchase Agreement: This outlines the terms of the transfer, including purchase price, effective date, and representations by both parties.
  3. Conduct a Vote or Get Consent: Obtain written approval from members as required by the operating agreement or by default state law.
  4. Amend the Operating Agreement: Reflect the ownership change and update member contributions, roles, and voting percentages.
  5. Issue New Membership Certificates (if applicable): This serves as a record of ownership for the new member(s).
  6. Update Internal and Financial Records: Notify your accountant or payroll provider and update tax and financial documents.
  7. Consider Notifying External Agencies: If licenses, bank accounts, or EIN information are tied to the prior member, update these to reflect the new ownership.

Note: You don’t need to file ownership changes with the Washington Secretary of State unless there is a change in governing persons or other public information. However, retaining proper internal documentation is crucial for compliance.

How to Add Another Member to an LLC

Discuss ownership percentages with current and prospective members. When everyone comes to an agreement on how to split them, prepare an amendment to your operating agreement that adds the new member. The amendment should include the following:

  • New member's name
  • Capital contributions from the new member
  • New member's ownership percentage
  • New member's percentage of profits and losses

Members should take a formal vote on the amendment, as outlined in your operating agreement. Record the vote in your minutes. All members — current and new — should sign the amended agreement, which you should keep with other important business papers.

To make ownership changes go as smoothly as possible, you should prepare for them in advance. Having everything outlined in your business's formation documents is the best way to ensure that everyone is on the same page when it comes to the company.

Filing the Annual Report After Ownership Changes

While Washington State does not require a direct filing for ownership changes, the Annual Report serves as a public update tool and must reflect the LLC’s current governing persons:

  • File your report annually by the last day of the month in which your LLC was formed.
  • If your ownership change results in a new member managing the LLC, list that member as a governor in the Annual Report.
  • Use the Corporations and Charities Filing System (CCFS) to update your report online or submit a paper version if preferred.

Timely and accurate filing keeps your LLC in good standing and ensures transparency in business operations.

Common Ownership Change Scenarios

Understanding the context of the change helps determine the right approach:

  • Partial Transfer: A member sells a portion of their interest to another existing or new member.
  • Full Sale of Membership: A member exits entirely and sells their full share to another party.
  • Buyout of a Member: The LLC or remaining members purchase the departing member’s interest.
  • Death of a Member: The estate may transfer the interest, depending on the terms in the operating agreement or state succession laws.
  • Divorce Settlements or Legal Judgments: Court orders may enforce ownership transfers that must be honored in the LLC’s records.

Each situation requires slightly different documentation and approvals but must be handled in a way that aligns with the operating agreement and protects the LLC's liability shield.

Tax and Legal Considerations

Before finalizing a Washington State LLC change ownership, it's important to consider:

  • Federal Tax Impact: Depending on the LLC’s tax classification (partnership or S-corp, for example), changes in membership can trigger IRS filing requirements or impact capital accounts.
  • Washington Business Licensing: If the company structure changes, such as converting from a single-member to multi-member LLC, you may need to update your license or registration with the Business Licensing Service.
  • Capital Contributions and Profit Sharing: The buyout or addition of members may alter the distribution of profits, which should be accounted for in both the operating agreement and IRS reporting.

Consulting with a tax professional or business attorney can help ensure that changes are structured in a tax-efficient and legally sound manner. You can find qualified attorneys on UpCounsel for support with LLC ownership transfers and agreement drafting.

Frequently Asked Questions

  1. Does Washington State require notifying the Secretary of State when an LLC member changes?
    Not always. If the ownership change doesn't affect the governing persons listed in public records, notification is not required. However, changes should be reflected in your operating agreement and future annual reports.
  2. Can I transfer my LLC ownership without other members’ consent?
    In most cases, no. Washington law or your LLC operating agreement likely requires unanimous or majority member approval to transfer ownership.
  3. What happens if I don’t have a buy-sell agreement?
    Without a buy-sell agreement, disputes or forced dissolution may occur. It's best to establish one early to clarify procedures for voluntary or involuntary exits.
  4. Do I need to get a new EIN if ownership changes?
    Generally, a new EIN is not required unless the LLC structure changes (e.g., from single-member to multi-member). Still, you may need to update IRS records using Form 8822-B.
  5. Is it necessary to involve an attorney for LLC ownership transfers in Washington?
    While not legally required, working with an attorney can prevent costly mistakes, especially when drafting agreements or navigating disputes. You can connect with experienced attorneys through UpCounsel.

If you need help with how to change ownership of a business in Washington state, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.