How to Merge Two LLCs: Everything You Need to Know
Knowing how to merge two LLCs is important for a business. Limited liability company owners profit from having a current LLC merge into another one.3 min read
Updated October 30, 2020:
Knowing how to merge two LLCs is important for a business. Limited liability company owners profit from having a current LLC merge into another one. They're able to enjoy limited liability for any of the LLC's financial obligations. It's necessary to go through a state agency for one LLC to merge with another. When the merger happens, one of the LLCs will not exist anymore. Property that was owned prior, plus the financial obligations of the LLCs turn into the obligations of the LLC that survives.
What Happens After Merging 2 LLCs
One of the most popular kinds of business structures is a limited liability company, mostly due to how many tax benefits there are associated with it. When a merger happens between two LLCs, it's likely that they both will operate under the LLC business license. This will not make the process messy in any way. The transition might even become simplified since both sides will know the identical set of company rules.
You'll need to notify anyone who might be affected by the LLC merging and being eliminated, including:
- The IRS (if there's an EIN).
- Vendor accounts.
- Registered agent.
- Loan or banking accounts.
Steps to Merge 2 LLCs
Before the LLCs are merged, it's necessary to have a plan of merger. Both owners will need to get together to create the plan. You'll need to list the name of every LLC party in the merger who's involved, as well as the surviving LLC's name. The surviving entity needs to be identified as an LLC. The terms and conditions will need to be set for the merger.
The document should also list the LLC's main place of business and what the basis and manner are for changing the interests of the current LLCs into the obligations or interests of the LLC that's surviving.
Obtaining Approval to Merge 2 LLCs
After establishing the plan of merger, you'll need to get approval for your plan. The LLC members need to hold a vote on this merger. If there's a domestic LLC, every member needs to approve it unless the operating agreement says otherwise. As an example, a domestic LLC may need a 75-percent positive vote from its members in order for the merger to be approved. If the LLC is foreign, the members need to stick to the percentage of votes required by the state in which the foreign LLC was filed.
A copy of the document also must go to all shareholders of every company. This is best done when a shareholder meeting is taking place, as management can go over the benefits of this merger and allow time to answer questions that the shareholders might have.
State Agency Involvement
After getting a positive vote on the plan of merger, the articles of merger needs to be formed. This form is on the secretary of state's website as well as the website for the agency that's in charge of the state's business filings. After the articles of merger are created, they should be filed with the secretary of state or another agency in the state. You'll need to pay the mandatory filing fee and wait for the merger to be approved by the state agency. This dissolves the LLC that ends up merging.
What to Include in the Articles of Merger
There needs to be specific information in the articles of merger. The name of the LLCs involved should be listed as well as the date the LLCs filed their articles of organization and what jurisdiction the LLCs were organized in. They also need to have a declaration that the plan of merger obtained approval and a signature of every LLC is included. The surviving LLC needs to list its name and address, what necessary changes were made in the articles of organization, and when the merger became effective.
If either party in the merger is a foreign LLC, the jurisdiction where the LLC was organized must be filed as well as the filing date for the application of authority and the filing date for the articles of organization.
If you need help with how to merge two LLCs, 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.