A Limited Liability Company (LLC) may seek the addition of a new member (as LLC owners are called) in order to benefit from the individual's contributions or expertise in the business, or simply to replace a removed member. There are two ways to become a member. One way is to create an LLC with you listed as a founding member. The other way is to seek approval from an established LLC to be added as one of its members. Either method requires certain procedures and documents to be completed before the decision is considered final.
Include your name in the LLC's articles of organization as a founding member. The articles of organization are the initial paperwork that is performed when an LLC is established. The documents detail the name of the company, purpose, organization, membership and ownership. After the articles of organization have been filled out, they are filed with the secretary of state in the state where the LLC is being established. Filing the paperwork with your name as one of the owners will establish the LLC with you already as a member.
Read More: How to Omit a Member of an LLC
Read the LLC's operating agreement, if the company is already established and has such as agreement, for specific instructions on how to become a member. The operating agreement outlines the organizational rules of your company, including how new members are removed or added.
Call for a company meeting of the LLC members if the operating agreement does not provide proper instruction on how to add a member. Existing members will need to amend the procedures to ensure that the LLC is passed on long after its founding members. Members will need to consider what conditions or requirements the new member will need to meet to deserve the title.
Carry out the instructions outlined in the operating agreement, including any buyout agreements. Memberships are rarely just handed out. They may require an individual to buy into the position with monetary contributions, property, or any other asset that will be useful to the company.
Ask for a meeting of the LLC members so that they may vote on whether or not to include you as a member. The operating agreement will provide further guidance on how many votes are needed in your favor. Some agreements may require a simple majority vote, while others may require a unanimous vote.
Ask the voting members to provide their decision in writing, so that there is written proof of their approval. All members should sign the resolution, or if the operating agreement allows, just the majority voting members. The voting membership may wish to draft a resolution of members. The document details their approval of the change in membership and the name of the new member.
Amend the LLC operating agreement to reflect the changes in ownership. Failure to change this document may produce issues in the future, even possible litigation, as the LLC will be governed by outdated procedures. Keep a signed copy of the agreement filed among your records.
Research any additional state requirements for changing members in an LLC. Some states will require LLCs to provide an amendment to the operating agreement, designating the new members within its text. This amendment must be sent to the secretary of state's office or a designated state agency office. Arizona, for example, requires that LLCs file amended articles of organization to the Arizona Corporation Commission. Other states may require an annual report to reflect the changes in ownership. Regardless, the state must be notified so that tax and ownership information are updated.
- Jupiterimages/Photos.com/Getty Images