Q: I am inquiring about how to transfer LLC ownership over to my spouse. Is this something your company does?
Thank you to a client from Michigan for that great question! Northwest can absolutely assist with transferring LLC ownership! In this case where our client is simply transferring ownership of a single-member LLC over to their spouse, the process is pretty straightforward. In situations where an LLC has multiple members, you would first need the consent of all LLC members before transferring ownership. In any case, the first step is to consult your LLC operating agreement and follow your LLC’s own policies for transferring membership interest. We’ll explain how transferring LLC ownership works in Michigan.
1. Consult your Michigan LLC operating agreement
The first step is to review your LLC operating agreement, which should include a provision on how membership interest can be transferred in your Michigan LLC. In most cases, transferring ownership of your LLC will mean one person buying out another person’s membership interest. This could either be a partial transfer, where part of the LLC’s membership interest is transferred to a new owner, or a full transfer, where all membership interest is transferred to new owners. In this case, our client wants to transfer 100% of their membership interest over to their spouse.
In a multi-member LLC, you will need unanimous approval from all LLC members in order to transfer membership interest, unless your operating agreement says otherwise. Transferring LLC ownership can be complicated, so it’s a good idea to hire an attorney or CPA to help you through the process.
What if my LLC doesn’t have an operating agreement?
If your LLC doesn’t have an operating agreement, you’ll need to follow Michigan’s default laws for transferring LLC membership interest (refer to the Michigan Limited Liability Company Act). According to Michigan law, in the absence of an operating agreement, a new member may only gain ownership with the unanimous consent of all members with voting rights in the LLC.
That being said, it’s a good idea to adopt an operating agreement for your LLC, since doing so can help you avoid disputes and let you create your own rules for your business. Check out Northwest’s free, lawyer-reviewed Michigan LLC operating agreement templates.
2. Vote to transfer membership interest.
The process to transfer membership interest will depend on the rules in your operating agreement. But typically, you will need to hold a vote and get approval in writing. (Check out our LLC member resolution template.)
Of course, if you have a single-member LLC, you’re free to transfer your LLC to a new owner without holding a formal vote.
3. Amend your operating agreement.
Once you’ve agreed to transfer ownership, you’ll need to amend your operating agreement with the new owner’s name, address, and ownership percentage. Follow your operating agreement’s policy for how it can be amended.
4. Change your IRS responsible party.
Do I need to inform the Michigan Secretary of State when my LLC changes owners?
No. Luckily, Michigan doesn’t require LLCs to include member information in the Articles of Organization or Michigan Annual Report, so you won’t need to inform the state when your LLC changes hands.