Q: I currently own an LLC with one other partner in the state of Pennsylvania. I’m looking to switch out that person for another. What do I need to do?
Thank you to a customer from Pennsylvania for that great question! It’s common for an to LLC lose or gain members as the business evolves. To change the members of a Pennsylvania LLC, you’ll need to amend your LLC operating agreement. We’ll help you through the process.
Can I add or remove members from my PA LLC?
Of course! Assuming everyone is in agreement with the changes and they are allowable by the operating agreement, it’s simple for members to withdraw or for new members to be added to a Pennsylvania LLC.
Typically, adding or removing members can be done by amending your Pennsylvania operating agreement with your updated member information. Take note that withdrawing from the LLC does not by itself eliminate economic interest in the business, so ideally the operating agreement would include a buyout process for exiting members.
How do I amend my LLC operating agreement?
Your operating agreement should include the names and addresses of all LLC members, so when your members change, you will need to amend your operating agreement. First, you should consult the operating agreement itself and follow its policy for how it can be amended. The process could vary depending on the policies you’ve put in place for your LLC, but usually, the steps for amending an operating agreement look like this:
- Hold a meeting of all LLC members
- Draft a member resolution (to add or remove a member)
- Vote on the member resolution
- Pass the resolution with majority approval
- Save the member resolution with your records
Do I need to file an amendment of my Pennsylvania LLC Certificate of Organization?
No. The Pennsylvania Certificate of Organization doesn’t include member information, so you don’t need to file an amendment when your LLC membership changes.
Do I need to inform the IRS when I add or remove a member of my LLC?
It depends. Usually, you won’t need to contact the IRS when your LLC members change. However, if your LLC goes from being a single-member LLC to a multi-member LLC (or vice versa), your tax classification will change, so you will need to inform the IRS by submitting Form 8832. This is because single-member LLCs are taxed as “disregarded entities,” and multi-member LLCs are taxed as partnerships.
Also, if the member who is leaving your LLC was named as your “responsible party” for tax purposes, you will need to file Form 8822-B to change your responsible party with the IRS.