How to Transfer LLC Ownership in Arizona: 2024 Updates

If you have an LLC in Arizona and you wish to discontinue it, you don’t always have to dissolve it. You can transfer the ownership, and it will keep running the way it was. Transferring ownership of a Limited Liability Company (LLC) in Arizona is a relatively simple and straightforward process involving minimal paperwork. It can be partially or fully transferred to another owner.

LLCBuddy editors shared a step-by-step guide on how to transfer ownership of an LLC in Arizona. The steps might seem easy and doable. However, these are general steps and might need special attention for specific cities or regions in Arizona. Hence, it is recommended to consult an attorney or legal expert before taking the steps.

How an LLC Ownership Structure Works in Arizona

By now, you must know that a limited liability company is one of the simplest forms of business structure. The ownership and transferring it to others is even simpler. For an LLC in Arizona or any other state in the United States, the company is considered an independent entity that is separated from its owners, which means the owners are not personally liable for the company’s debts or legal obligations.

The ownership structure of an LLC in Arizona is determined by the percentage of ownership interests held by each member. These ownership interests can be distributed however the members see fit and are typically outlined in the Operating Agreement drafted in Arizona.

There is no maximum limit on the number of members an LLC in Arizona can have, and the members can be individuals, other LLCs, corporations, or even foreign entities. This flexibility allows for a wide range of business structures, from single-member LLCs in Arizona to large, multi-member LLCs with complex ownership arrangements.

What is Arizona LLC Buy-Sell Agreement in Ownership Transfer?

In Arizona, the buy-sell agreement is a part of your operating agreement. It explains the instructions for buying and selling the LLC ownership. For example, who can be the member of Arizona LLC, how will buy out and sell of the LLC be determined, whether the members of the LLC in Arizona will buy the shares of the leaving owner, and how – these are the points you have in the buy-sell agreement.

Buy Out Arizona LLC or Partial Transfer: In this case, the members of the LLC generally buy the shares of the owner who is leaving. As the LLC buys the owner’s interests, the shares get divided equally among the remaining Arizona LLC members. LLC members must approve the transfer, and then the Operating Agreement (OA) will be updated to exclude the departed owner.

If your LLC operating agreement does not specify these terms beforehand, you must follow Arizona state LLC law. In some states, ownership transfer does not simply take place. Instead, they have to dissolve the LLC to continue with the process. So, while you’re forming an Arizona LLC, make sure to create a buy-sell agreement beforehand.

Sell a Arizona LLC Or Fully Transfer: Selling an LLC or Fully Transferring the ownership is a bit more complicated than the buy-out process. In this condition, owners have the independent legal right to sell the interest to any third party. They do not need other members’ approval for this. The negotiation between the buyer and the seller involves complexities if there is no operating agreement in the first place. As an owner, you must find a buyer, write the change of ownership letter, set out other formalities, and voila! Your ownership transfer is done. The parties will settle the sale contract, including the LLC price, following Arizona state laws.

How to Transfer Arizona LLC Ownership

When an LLC member decides to step down from the owner’s position, they must transfer the ownership to someone else. It can be other existing members of the LLC or a third party. Transferring LLC ownership in Arizona is a common yet complex deed. LLC owners who want to transfer their ownership must follow some steps to do the task. Here are the following steps-

Step 1: Review Your Arizona LLC Operating Agreement

An operating agreement is a kind of non-mandatory document in many states. In Arizona, it is not mandatory to draft one. If you have one at the time of LLC formation in Arizona, then it would be easier for the owners to transfer the name. If not, then it should be filed at the time of transferring ownership. The operating agreement for the LLC in Arizona must be reviewed for the ownership transfer conditions and other legal requirements regarding the buy-out and sale of the LLC.

Step 2: Amend the Arizona Articles of Organization

Changing/transferring ownership might lead to structural change at the managerial level. In that case, the LLCs must comply with the Arizona Secretary of State. To do so, one must file the Arizona Articles of Organization amendment. Specifically in Texas, LLCs must submit a Public Information Report annually to the Texas Comptroller of Public Accounts. The managerial changes will be explained there.

As soon as the ownership transfer negotiation is done and the agreement is made with the updated change of ownership, file it with the Secretary of State. For that, you must amend the Articles of Organization and get the Articles of Amendment. Make the changes to the existing Articles of Organization, get the amendment form, and submit it to the Arizona SOS along with other documents and the filing fee. Read how to amend Arizona Articles of Organization in a simple way.

Step 3: Spread the News

Once the legal formalities are done, and the ownership of your LLC is transferred officially in Arizona, you must spread the word to the clients, partners, and other concerned people. Also, banks and other financial institutions should be notified about the ownership change. Business entities, vendors, and other officials you work with should also be notified.

Step 4: Obtain a New EIN (optional)

You might need to apply for a new EIN based on the LLC ownership transfer. After officially transferring ownership, you must check with the IRS whether you need a new EIN. There is a formal form to notify the IRS about the LLC ownership transfer. Get the form from their website, enter the details, and submit it. You will get notified whether you need to apply for a new EIN.

Why Transfer LLC Ownership in Arizona

There can be several reasons why the transfer of LLC ownership in Arizona takes place in any organization. Some of the most common reasons include the following-

Death of the LLC owner
Separation or Divorce of the LLC Owners
LLC owners do not wish to continue their association with the organization
LLC owners want to appoint a new member (owner)
LLC owners want to sell the business off to someone else

These are some of the common reasons why an LLC ownership gets transferred in Arizona. Transferring LLC ownership requires a comprehensive LLC operating agreement in Arizona. This is an internal document every LLC should have at the time of formation.

The Role of Arizona Operating Agreement in LLC Ownership Transfer

Creating an Operating Agreement in Arizona is one of the major steps in forming a limited liability company (LLC). However, many states do not require an Operating Agreement. California, New York, Delaware, Maine, Nebraska, and Missouri are the states where an LLC operating agreement is mandatory.

Even when your state does not necessarily need you to file the operating agreement, it is recommended that you should have it to avoid any internal disagreements or issues in the future.
LLCBuddy Editorial Team

An operating agreement is an internal document explaining all the procedures, including ownership transfer, dissolution, LLC operation, members, and other LLC-related processes. Operations, such as dissolution and ownership transfer, occur based on those written regulations.

If there is no Arizona Operating Agreement or it does not have clear ownership transfer or buy-sell agreement provisions, the transfer takes place based on Arizona state law.

What to Include in Arizona Operating Agreement

This official document outlines the company’s structure, the members’ details, the dissolution process, and a lot more. Hence, it is always wise to have one to avoid any confusion in the future, whether your state needs it or not. The LLC operating agreement should have the following points-

Whether LLC members are related to each other and what type of relationships they share
Managers’ rights and responsibilities
Operating Agreement Amendment conditions
Members’ profit and loss shares
Arizona LLC Tax structures
Transfer of ownership rules and procedure
Dissolution of Arizona LLC

If your operating agreement explains all the above points, you must follow it for the ownership transfer.

Reasons to Transfer Arizona LLC Ownership

There can be many issues that lead to ownership transfer. One of the most common issues is the death of the owner. There can be other issues where transfer of ownership occurs. Here are some issues to consider,

Divorce Or End of Marriage: In some cases, according to the divorce decree, the ownership transfers to the spouse. If the LLC in Arizona has an operating agreement and the ownership transfer condition is specified, then the LLC must follow the Arizona operating agreement to proceed.

Death of a Member: This is the most common issue in LLCs. In Arizona, if a member dies, the ownership, by default, transfers to the legal heirs of the deceased person. However, in this case, the legal heirs (wife/husband/kids) do not get any managerial power or authority. They continue enjoying the benefits, such as a share of the profit and others. But they won’t get any other power in the company. In such situations, other members of the Arizona LLC often buy out the deceased’s interests.

Dissolution of Arizona LLC: If any member/owner plans to leave the company, the LLC gets dissolved and reformed with the new policy and operating agreement. The members and managers make this sort of decision at the time of the creation of the operating agreement.

FAQs

Can I transfer ownership of my Arizona LLC?

Yes, ownership of an Arizona LLC can be transferred to another party.

Do I need to notify the state of Arizona when transferring LLC ownership?

Yes, in Arizona, you are required to update the LLC’s Articles of Organization with the new ownership information.

What is the process for transferring ownership of an Arizona LLC?

The process typically involves updating the LLC’s operating agreement and filing an amendment to the Articles of Organization with the Arizona Corporation Commission.

Are there any fees associated with transferring ownership of an Arizona LLC?

Yes, there may be filing fees required when you update the LLC’s registration documents with the Arizona Corporation Commission.

Do I need to get consent from all members before transferring ownership of an Arizona LLC?

It is recommended to have the consent of all members before transferring ownership of an Arizona LLC, as outlined in the LLC’s operating agreement.

Can I transfer partial ownership of an Arizona LLC?

Yes, you can transfer partial ownership of an Arizona LLC to another party.

Are there any restrictions on who can become a new owner of an Arizona LLC?

The restrictions on new owners of an Arizona LLC are typically outlined in the LLC’s operating agreement.

How do I document the transfer of ownership of an Arizona LLC?

The transfer of ownership can be documented through an assignment of membership interest or an updated operating agreement.

Do I need to update the Arizona Department of Revenue when transferring ownership of an Arizona LLC?

Yes, you may need to update the Arizona Department of Revenue with the new ownership information for tax purposes.

What happens to the LLC’s EIN when ownership is transferred in Arizona?

The LLC’s EIN (Employer Identification Number) remains the same when ownership is transferred in Arizona.

Can an Arizona LLC be transferred to a trust?

Yes, an Arizona LLC can be transferred to a trust, but it is important to consult with legal and tax professionals.

What are the tax implications of transferring ownership of an Arizona LLC?

There may be tax implications when transferring ownership of an Arizona LLC, so it is recommended to consult with a tax professional.

Can I transfer ownership of an Arizona LLC online?

Yes, in some cases, you may be able to update ownership information for an Arizona LLC online through the Arizona Corporation Commission’s website.

Do I need an attorney to transfer ownership of an Arizona LLC?

While not required, it is recommended to consult with an attorney when transferring ownership of an Arizona LLC to ensure all legal requirements are met.

Can I transfer ownership of an Arizona LLC to a foreign entity?

Yes, an Arizona LLC can be transferred to a foreign entity, but it is important to comply with any additional regulations or filing requirements.

Can the original owner of an Arizona LLC retain any ownership after transferring it?

Yes, the original owner of an Arizona LLC can retain ownership if the transfer involves only partial ownership.

Can I transfer ownership of an Arizona LLC if it is involved in ongoing litigation?

Transferring ownership of an Arizona LLC involved in ongoing litigation may be complex, so it is recommended to seek legal advice.

Are there any time constraints for transferring ownership of an Arizona LLC?

While there may not be specific time constraints, it is recommended to complete the transfer in a timely manner to avoid any complications.

Does transferring ownership of an Arizona LLC affect its standing with the state?

Transferring ownership of an Arizona LLC does not typically affect the LLC’s standing with the state, as long as all necessary filings are completed.

Can I transfer ownership of an Arizona LLC if it has outstanding debts?

Transferring ownership of an Arizona LLC with outstanding debts may require additional steps or considerations, so it is recommended to consult with a legal professional.

Will the Arizona Corporation Commission provide assistance with transferring ownership of an Arizona LLC?

The Arizona Corporation Commission may provide guidance and resources for transferring ownership of an Arizona LLC, but legal advice is recommended.

Can I transfer ownership of an Arizona LLC if it is in good standing with the state?

Yes, an Arizona LLC can transfer ownership even if it is in good standing with the state, as long as the proper procedures are followed.

Do I need to update the Arizona LLC’s registered agent when transferring ownership?

Yes, it is important to update the Arizona LLC’s registered agent with the new ownership information after the transfer.

Can I transfer ownership of an Arizona LLC to a non-profit organization?

Yes, an Arizona LLC can be transferred to a non-profit organization, but specific regulations may apply, so it is recommended to seek legal advice.

What documentation is required for transferring ownership of an Arizona LLC?

The documentation required for transferring ownership of an Arizona LLC may include an assignment of membership interest and an updated operating agreement.

Can I transfer ownership of an Arizona LLC to a minor?

Ownership of an Arizona LLC cannot typically be transferred to a minor; instead, a guardian may need to manage the ownership on behalf of the minor.

Can the new owner of an Arizona LLC make changes to the LLC’s operating agreement?

The new owner of an Arizona LLC may be able to make changes to the LLC’s operating agreement with the consent of the other members.

Does transferring ownership of an Arizona LLC affect the LLC’s contracts and agreements?

Transferring ownership of an Arizona LLC may require the assignment or transfer of contracts and agreements associated with the LLC.

Can I transfer ownership of an Arizona LLC without the consent of the other members?

It is recommended to have the consent of the other members when transferring ownership of an Arizona LLC to avoid potential disputes.

How do I transfer ownership of my Arizona LLC?

To transfer ownership of an Arizona LLC, you typically need to amend the operating agreement to reflect the new ownership structure.

In Conclusion

As you all know, forming a limited liability company is much easier than forming a corporation, a partnership, or any other type of business. The ease of transferring ownership from one to another is one of the many reasons for entrepreneurs to start an LLC. In Arizona, transferring LLC ownership does not need a lot of paperwork or steps. You must update the formation papers with the new ownership information, file the amendment to the formation document, tell people about it, and comply with the state.

Though it seems easy to file documents while transferring ownership, it could be more complex than just these steps. Based on the local regulations, nature of business, or some other administrative rules, transferring ownership in Arizona might take more than what it looks like. It is recommended to consult a professional or attorney before you take such an important business decision.