LLC Membership Interest Transfer Agreement: Everything You Need to Know
An LLC membership interest transfer agreement must be filled out correctly and completely to protect members' interest.3 min read
An LLC membership interest transfer agreement must be filled out correctly and completely to protect members' interest.
LLC Membership Interest Assignment
An LLC membership interest assignment document is used when a member of a limited liability company wants to transfer all of his or her interest in the business to another party. This document is used when an LLC member is leaving or wants to give up his interest in the company altogether. The law will allow the ownership interest to be transferred in some cases.
However, this transaction means the new owner won't have a right to run the LLC. He or she will only have a share of the profits and losses. Most states require Articles of Organization to be filed when forming a limited liability company. This is in compliance with the state's laws. A limited liability company can be created and operated for any reason the business chooses, as long as they are within the law.
For example, if an individual runs a small dog-walking business, this person might want to form an LLC with a co-owner so they're both protected. If one owner no longer has an interest in the LLC, he can use the LLC Membership Interest Assignment so that interest can be assigned to someone else.
These documents are short and easy to fill out. All the information that's necessary to transfer an LLC is included. There is a spot for both the person who receives the interests (the assignee) and the person who transfers the interest (the assignor) to complete the document.
The LLC Membership Interest Assignments are governed by the laws in each state; federal law isn't involved with these. To change the LLC Membership Interest Assignments form, another form is filled out online. Once complete, it can be sent in PDF and Word formats for no charge. It can be modified and used again in the future.
LLC Membership Interest Assignment: How To Use
An owner involved in an LLC is called a member. The member's interest in the limited liability company is called the ownership stake. If any member of the LLC needs or wants to transfer ownership rights, this is done with an assignment of interest.
The LLC Membership Interest Assignment is used when a member wants to transfer his ownership in an LLC. It also can be used if a person wants that interest transferred to them, assuming the current member agrees to this. Both parties should understand that the membership interest will be reassigned. Both parties should keep a copy of the agreement on file.
The LLC Membership Interest Assignment requires this information:
- The identities of both the parties as well as additional details of the membership interest.
- Whether this interest comes with the right to vote.
- What the percentage of the membership interest is.
There is an addendum at the end of the LLC Membership Interest Assignment that is optional. This is used in case the rest of the LLC members need to give full consent to the transfer.
This form needs signatures from the party receiving the document and the party who is assigning the interest. If there are only two total members, meaning just one will be left after the transfer, the process of transfer is easy. There are several forms to fill out, but the member essentially gives all his rights in the LLC to the member who remains. This transfer process differs depending on which state the transfer takes place in.
The majority of LLC statutes distinguish between member rights and member interests. The essential difference is the transferable interest of the member often only includes the right to participate in financial interests and other distributions as well as a share of profits or losses. They do not have a right to participate in control and management.
Usually, the member's financial interest can be assigned freely, given there aren't restrictions stated in the operating agreement. For example, in Washington state, an individual or entity that's assigned the member's interest can't participate in managing the LLC. The exception to this is if the assignee is admitted as a member through agreement by all the other members or through a process listed in the operating agreement.
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