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How to Transfer LLC Ownership in Texas (6 Easy Steps)

Max Smith

Reading Time: 6 minutes

Having an LLC is beneficial, but you may retire and wish to transfer your membership to your heir. Also, you can exit and transfer your membership to another LLC. In that case, do you know how to transfer LLC ownership in Texas?

Multiple reasons can be behind your decision to transfer your share or membership of an LLC. However, you must follow your official guidelines and state rules to meet some formal standards. It will help you to understand the issues regarding ownership transactions and information. 

Without further ado, let’s go into the depths of changing LLC ownership in Texas. 

There are many common reasons for changing ownership of an LLC in Texas.

  • One reason could be if the original LLC owner passes away.
  • Another common reason is if the LLC owners decide to separate or get divorced. 
  • The current LLC owners sometimes want to leave the business and transfer ownership to someone new. 
  • Owners may wish to sell the entire business to a new person or group.

Okay, that was all about the reasons, but what about transferring LLC ownership to Texas? Find out in the next section!

6 Steps to Transfer LLC Ownership in Texas

Whether selling your business or bringing in new partners, you must follow some steps and adhere to state laws. When LLC owners want to transfer their ownership, they must follow specific steps to do so correctly in Texas. 

So, do you want to know how to change ownership of LLC in Texas? Let’s check out the steps in transferring ownership of an LLC in Texas in 2024.

Step 1: Understanding the LLC Ownership Transfer in Texas

Firstly, you have to understand the concept of an LLC or operating agreement. You must understand and apply for the LLC transfer of ownership from Texas.

Furthermore, you must determine asset protection, tax benefits, or organizational purposes for the LLC change of ownership from Texas.

Step 2: Review the Operating Agreement

First, if you own an LLC in Texas, you would know that an operating agreement is not mandatory in Texas. Initially, you have to create an operating agreement with the help of the default laws of Texas to transfer an LLC in Texas.

However, if you have it, you should review it carefully. You should now check the specific terms and conditions and legal requirements for transferring LLC ownership in Texas, such as 

  • The percentage of ownership transferred.
  • The purchase price. 
  • Any additional provisions or warranties.

Step 3: Obtain Consent from Members

If your LLC’s operating agreement says you need approval from the other members, you must obtain that approval first. You need to communicate with the other members to be open and transparent about your plans to transfer your ownership stake. 

Furthermore, you should address their concerns or questions and work to obtain their approval. Therefore, you can move forward with the LLC transfer. Following the proper process can smooth the way for the LLC to transfer ownership from Texas.

Step 4: Amend the Texas Certificate of Formation

In Texas, if the management of the LLC changes because of the new ownership, the company has to follow specific rules from the Texas Secretary of State. In particular, your company needs to file an amendment to the Certificate of Formation. Then, you have to update your company records with the name of the new owner of the LLC.

Additionally, your company must submit an annual report to the Texas Comptroller’s Office. Therefore, you must carefully check the details of any management changes due to the LLC transfer. 

Once everything is finalized, the LLC must officially inform the Texas Secretary of State. Your company must amend its original Certificate of Formation, including updated paperwork, other necessary documents, and a fee. 

Moreover, if you are unsure about any aspect of the transfer, you can take advice from professionals in Texas.

Step 5: Notify Relevant Parties

Once you have completed the transfer of ownership to the LLC, you must inform all LLC members, as well as the company’s clients and suppliers. Additionally, depending on your business’s regulations, you may be required to notify specific government agencies or regulatory bodies.

Importantly, you must ensure that the ownership change is recorded correctly and that your company complies with all relevant laws and regulations.

Step 6: Obtain a New EIN

After your LLC’s ownership has officially changed, you should check with the IRS to see if you need a new EIN. To notify the IRS about the LLC’s change of ownership in Texas, you must fill out a specific form on the IRS website. 

So, fill out this form with the details of the ownership change and submit it to the IRS, not the Texas Secretary of State. They will then let you know whether you need to apply for a new EIN for your LLC under the new ownership structure.

Additionally, you may need to apply for a new employer identification number (EIN) from the IRS if required. 

However, you may face some issues while transferring ownership. Do you wonder what they are? Find out in the next section!

Issues Regarding the Transfer of LLC Ownership

When you transfer ownership of an LLC in Texas, you can face challenges and considerations requiring careful attention.

  • The LLC’s operating agreement outlines the rules for transferring ownership, such as any restrictions, member approvals needed, or how to value the business. You may face disputes or legal issues if these terms are not followed.
  • Sometimes, determining the correct value for ownership interests can be complex if the members disagree.
  • When ownership changes hands, you may owe taxes in Texas, such as capital gains and income taxes. You have to plan carefully to minimize the tax burden, and you may seek professional advice.
  • You may have trouble filling out forms for the Texas Secretary of State. If you do not complete the forms correctly, you may face penalties or legal issues.
  • It may be difficult to upgrade the documents to match the new owner’s name. Following the law and keeping accurate records while updating the official records is crucial.
  • You are getting advice from legal, financial, and tax experts when transferring an LLC. However, sometimes, these experts charge high fees, and inappropriate advice can create legal issues. In that case, you may not be able to transfer the LLC properly and legally in Texas.

Conclusion

In the end, you might find your answer to the question, “How to transfer LLC ownership in Texas?” Nevertheless, transferring ownership of an LLC in Texas requires careful planning and following the proper steps. 

Importantly, you must understand the rules around ownership transfers. To ensure a smooth and successful transfer process, you can seek professional assistance and follow the steps outlined in this guide.

With proper preparation and attention to detail, you can navigate the process of transferring LLC ownership in Texas with confidence in 2024. Lastly, do you know how to add a member to an LLC in Texas?

Key Points

Check out some of the major points from the above discussion. 

  • Understand why LLCs are transferred and determine asset protection, tax benefits, or organizational purposes.
  • If the LLC already exists, carefully review the operating agreement to ensure it allows for property acquisition and outlines the procedures.
  • What if the LLC doesn’t exist? You must form one by filing the necessary documents with the Texas Secretary of State.
  • Draft a detailed agreement outlining the terms of the property transfer, including information about the property, price, and any conditions.
  • Have all relevant parties sign the transfer agreement to complete the property transfer to the LLC formally.
  • Record the property transfer with the appropriate county clerk’s office in Texas to establish a transparent chain of title.
  • Update all relevant property records to reflect the LLC as the new owner.
  • Consult a tax professional to understand the tax consequences of transferring the property to the LLC.

Frequently Asked Questions

How do I change ownership of an LLC in Texas?

There are two methods to change the membership of an LLC. They are issuing membership in existing units and transferring existing units. The LLC operating agreement will help you take the necessary steps. Moreover, you must prepare new documents, including the members details and inform the state officials about the ownership changes. 

How to file a certificate of amendment in Texas?

Form 424 is the form to file a certificate of amendment in Texas. You can submit it to Texas SOSDirect online, in person, or by mail. Moreover, the filing fee is $150, and the processing time is 3 to 5 days. 

What is the LLC change of ownership form Texas?

There is Form 8822-B. It changes the address or identifies the LLC’s responsible party. It is usually used to inform the IRS about the LLC membership change. Moreover, you need to submit the form to the IRS within 60 days.

Max Smith - LLC Formation

He is a seasoned entrepreneur and legal expert at LLC Formation Hub. With a stellar track record in both business and law, Max simplifies the complexities of LLCs. His practical insights, featured on LLC Formation Hub, empower entrepreneurs across the USA. Max merges business finesse with legal acuity to guide businesses toward success.


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