Key Takeaways

  • Selling an LLC requires understanding legal, financial, and tax implications, and ensuring compliance with the LLC’s operating agreement and state laws.
  • Partial ownership changes involve transferring membership interests, which may require approval per the operating agreement or buy-sell agreements.
  • Complete ownership sales involve business valuation, finding a buyer, negotiating terms, and finalizing the sale through legal documentation.
  • Business valuation is critical to determine a fair price and may require the help of an appraiser or accountant.
  • Marketing an LLC sale involves confidentiality agreements, identifying potential buyers, and engaging a business broker if necessary.
  • Due diligence includes financial statements, tax returns, contracts, and other legal documentation to reassure buyers.
  • Tax implications vary based on whether the LLC is sold as an entity or as individual assets, which can significantly impact liabilities.
  • Legal documents needed include a Letter of Intent (LOI), Purchase Agreement, Bill of Sale, and any necessary state filings.
  • Post-sale considerations include transitioning operations, notifying relevant agencies, and ensuring compliance with contractual obligations.

If you are interested in selling an LLC business, you'll need to draft a bill of sale. Selling a single-owner LLC is simple; the owner can sell it for whatever price they want. However, a multiple member LLC may involve following the rules laid out in the operating agreement.

Although selling an LLC is not a complicated matter, owners should first contact an attorney to create the bill of sale to make sure all is done properly. If the owner is buying membership interests from another member, a document called “articles of amendment” is need to show the change in the LLC membership. This should then be filed with the state agency with which the LLC is registered. Make sure a registered agent is still working to maintain the good standing of the LLC.

Why LLCs Change Ownership

  • There are numerous reasons for changing the ownership of an LLC, such as:
  • One of the members chooses to leave the company.
  • Existing owners want to bring a new owner into the company.
  • An existing member may have passed away, gotten divorced, or become disabled.
  • One owner, or multiple owners, choose to sell the whole business.

The method by which LLC ownership changes take place depends on whether the LLC will have different owner names and percentages of ownership, or if the owners are entirely selling the business.

Understanding Business Valuation for an LLC

Before selling an LLC, determining its value is crucial. Several methods exist for valuation:

  • Asset-Based Valuation – Calculates the worth of tangible and intangible assets minus liabilities.
  • Market-Based Valuation – Compares the sale price of similar businesses in the market.
  • Income-Based Valuation – Uses past revenue and projected earnings to estimate value.

Engaging a professional appraiser or accountant can help ensure an accurate valuation. Additionally, a potential buyer may require financial audits or due diligence to confirm the business's value.

Partial Ownership Changes

Owners of an LLC are also referred to as members. In a multiple-owner LLC, each member owns their specific percentage of the company, also referred to as a membership interest. An owner who wants to change his ownership percentage must transfer some of his interests to another owner.

This is one important reason for having an operating agreement at the LLC's formation, even though most states do not require it. The procedure for doing this transfer will be specified in the operating agreement. This document should include provisions for buying or selling membership interests and the way they are accomplished.

LLCs may also have a buy-sell agreement that is separate from the operating agreement. This explains the method used for valuation of the membership interests. It may also lay out any restrictions about who may become a member or how transfers are approved. LLC members may be required to buy shares from a member who is leaving.

If such a document does not exist, state laws may be consulted for guidelines on how to transfer ownership in the LLC. A new buy-sell agreement may be drafted to deal with that specific situation. Some states require the LLC to be dissolved if the rules for transferring ownership are not specified in the operating agreement.

Situations such as this are a good reason for consulting with an attorney, because long-term consequences may arise from these actions. Operating agreements and other documents should be reviewed at this time to see if changes need to be made, such as switching from a single member to a multiple-member LLC. If needed, a new operating agreement should be composed to address the needs of the new ownership structure. Otherwise, an amendment listing new members may be drafted instead.

Most states do not require any documentation for ownership changes, but future annual reports must list current ownership information.

Complete Ownership Changes

Buy-sell agreements, whether they are part of the operating agreement or separate documents, do not usually cover how the business will be entirely sold; they only cover the transfer of ownership among members.

When an LLC is being entirely sold, the first thing that needs to happen is finding a buyer and agreeing on a sales price. A business valuation expert may be called in, and buyers may want to study the business's financial records, among other items. It's possible that the buyer will want to buy the entire LLC, or just its assets.

As the sale of an LLC can be complicated regarding both finances and taxes, it's a good idea to bring in an attorney with experience in buying and selling LLCs. Depending on the situation, sales terms are generally detailed in a memorandum, which is then followed by a formally structured contract.

Legal Documents Needed to Finalize the Sale

The following legal documents are essential to complete the sale:

  • Letter of Intent (LOI) – Outlines the preliminary terms and conditions of the sale.
  • Purchase Agreement – Specifies the final terms, liabilities, and transition responsibilities.
  • Bill of Sale – Officially transfers ownership of business assets.
  • Operating Agreement Amendment – If the business continues with new members, an amendment must be filed with the state.
  • IRS and State Filings – Notify tax authorities and regulatory agencies about ownership changes.

Engaging an attorney ensures all documents are properly drafted and filed.

Tax Implications of Selling an LLC

The tax treatment of an LLC sale depends on its structure and how the sale is structured:

  • Asset Sale vs. Entity Sale – Selling an LLC’s assets can have different tax consequences than selling membership interests.
  • Capital Gains Tax – Profits from the sale are subject to capital gains tax, which varies based on the holding period.
  • State Taxes – Some states impose transfer taxes or fees for changing business ownership.

Consulting a tax professional ensures proper structuring of the sale to minimize liabilities.

Preparing for Due Diligence

Buyers will conduct due diligence before finalizing the purchase. Sellers should prepare the following:

  • Financial statements for the past 3–5 years
  • Tax returns and outstanding liabilities
  • Business contracts, leases, and supplier agreements
  • Employee agreements and payroll records
  • Intellectual property documentation
  • Any pending litigation or regulatory compliance issues

Having these documents ready streamlines the process and reassures buyers of the LLC’s stability.

How to Find Buyers for Your LLC

Once the business valuation is established, the next step is attracting the right buyer. Options include:

  • Business Brokers – Professionals who specialize in selling businesses and can connect sellers with potential buyers.
  • Industry Networks – Selling to competitors or industry insiders who may be interested in expanding their operations.
  • Online Marketplaces – Websites like BizBuySell and other business-for-sale platforms allow owners to list their LLC.
  • Confidential Sales – For sensitive transactions, a lawyer can help facilitate private negotiations while maintaining anonymity.

A Non-Disclosure Agreement (NDA) should be signed by potential buyers to protect business information during negotiations.

Frequently Asked Questions

  1. Can I sell my LLC without the approval of other members?
    It depends on your LLC’s operating agreement. Many agreements require member approval before transferring ownership.
  2. How long does it take to sell an LLC?
    The timeline varies, but it typically takes 3–12 months, depending on business complexity, buyer availability, and negotiations.
  3. Do I need a lawyer to sell my LLC?
    Yes, legal guidance ensures compliance with contracts, tax laws, and state filing requirements.
  4. What happens to the LLC’s debts after the sale?
    Liabilities may transfer to the buyer or remain with the seller, depending on the terms outlined in the purchase agreement.
  5. Can I sell my LLC if it has outstanding legal issues?
    Yes, but unresolved legal matters can impact valuation and deter buyers. Addressing pending litigation beforehand is advisable.

If you need more information or help with selling an LLC business, 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.