How to Transfer LLC Ownership in Delaware: 2025 Updates

If you have an LLC in Delaware 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 Delaware 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 Delaware. The steps might seem easy and doable. However, these are general steps and might need special attention for specific cities or regions in Delaware. Hence, it is recommended to consult an attorney or legal expert before taking the steps.

How an LLC Ownership Structure Works in Delaware

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 Delaware 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 Delaware 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 Delaware.

There is no maximum limit on the number of members an LLC in Delaware 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 Delaware to large, multi-member LLCs with complex ownership arrangements.

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

In Delaware, 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 Delaware LLC, how will buy out and sell of the LLC be determined, whether the members of the LLC in Delaware will buy the shares of the leaving owner, and how – these are the points you have in the buy-sell agreement.

Buy Out Delaware 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 Delaware 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 Delaware 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 Delaware LLC, make sure to create a buy-sell agreement beforehand.

Sell a Delaware 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 Delaware state laws.

How to Transfer Delaware 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 Delaware 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 Delaware LLC Operating Agreement

An operating agreement is a kind of non-mandatory document in many states. In Delaware, it is mandatory to draft one. If you have one at the time of LLC formation in Delaware, 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 Delaware 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 Delaware Certificate of Formation

Changing/transferring ownership might lead to structural change at the managerial level. In that case, the LLCs must comply with the Delaware Secretary of State. To do so, one must file the Delaware Certificate of Formation 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 Certificate of Formation and get the Certificate of Amendment. Make the changes to the existing Certificate of Formation, get the amendment form, and submit it to the Delaware SOS along with other documents and the filing fee. Read how to amend Delaware Certificate of Formation 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 Delaware, 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 Delaware

There can be several reasons why the transfer of LLC ownership in Delaware 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 Delaware. Transferring LLC ownership requires a comprehensive LLC operating agreement in Delaware. This is an internal document every LLC should have at the time of formation.

The Role of Delaware Operating Agreement in LLC Ownership Transfer

Creating an Operating Agreement in Delaware 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 Delaware Operating Agreement or it does not have clear ownership transfer or buy-sell agreement provisions, the transfer takes place based on Delaware state law.

What to Include in Delaware 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
Delaware LLC Tax structures
Transfer of ownership rules and procedure
Dissolution of Delaware LLC

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

Reasons to Transfer Delaware 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 Delaware has an operating agreement and the ownership transfer condition is specified, then the LLC must follow the Delaware operating agreement to proceed.

Death of a Member: This is the most common issue in LLCs. In Delaware, 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 Delaware LLC often buy out the deceased’s interests.

Dissolution of Delaware 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

How do I transfer ownership of my Delaware LLC?

To transfer ownership of your Delaware LLC, you must follow the steps outlined in your operating agreement.

Can ownership of a Delaware LLC be transferred to someone outside the state?

Yes, ownership of a Delaware LLC can be transferred to someone outside the state.

Are there any specific forms that need to be filled out for transferring ownership of a Delaware LLC?

Yes, you will need to file an amendment to your Certificate of Formation with the state of Delaware.

What is the process for transferring ownership of a Delaware LLC to existing members?

The existing members must sign a written agreement documenting the transfer of ownership.

Can ownership of a Delaware LLC be transferred to a non-member?

Yes, ownership of a Delaware LLC can be transferred to a non-member.

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

Yes, you must update your Certificate of Formation with the Delaware Division of Corporations.

Is there a fee associated with transferring ownership of a Delaware LLC?

Yes, there is a fee for filing an amendment to update ownership information with the state of Delaware.

How long does it take to transfer ownership of a Delaware LLC?

The timeline for transferring ownership can vary, but it generally takes a few weeks to process the necessary paperwork.

Can I transfer partial ownership of my Delaware LLC?

Yes, you can transfer partial ownership of your Delaware LLC as long as your operating agreement allows for it.

Do I need to update my operating agreement when transferring ownership of my Delaware LLC?

It is recommended to update your operating agreement to reflect changes in ownership.

Can the ownership transfer of a Delaware LLC be contested?

Ownership transfer of a Delaware LLC can be challenged if there is a dispute between members or if the transfer violates the operating agreement.

Are there any restrictions on who can transfer ownership of a Delaware LLC?

Generally, there are no restrictions on who can transfer ownership of a Delaware LLC, but the operating agreement may include specific transfer provisions.

What documents are needed to transfer ownership of a Delaware LLC?

You will need to provide a written agreement documenting the transfer, as well as any necessary forms required by the state of Delaware.

Can I transfer ownership of my Delaware LLC to a trust?

Yes, you can transfer ownership of your Delaware LLC to a trust as long as it is permitted by your operating agreement.

Do I need to obtain consent from other members before transferring ownership of my Delaware LLC?

It depends on the provisions outlined in your operating agreement. Consent may be required from all members or a majority.

Who is responsible for updating ownership information with the state of Delaware?

The current members or the new owner who is taking over ownership of the LLC is responsible for updating ownership information with the state of Delaware.

Can I transfer ownership of a Delaware LLC without the consent of other members?

It depends on the operating agreement. In some cases, a member may have the right to transfer their ownership interest without consent.

How do I find out the existing ownership structure of my Delaware LLC?

You can review the documents filed with the state of Delaware or refer to the operating agreement to determine the existing ownership structure.

What information is required to update ownership information with the state of Delaware?

You will need to provide the names and addresses of the new owners, as well as the percentage of ownership being transferred.

Can ownership of a Delaware LLC be transferred in the event of a member’s death?

Yes, ownership of a Delaware LLC can be transferred in the event of a member’s death according to the terms outlined in the operating agreement.

How does transferring ownership of a Delaware LLC affect the company’s tax status?

Transferring ownership of a Delaware LLC typically does not affect the company’s tax status, but it may require updates to tax filings.

Do I need to notify the IRS of ownership changes in my Delaware LLC?

Yes, you should notify the IRS of any ownership changes in your Delaware LLC to ensure compliance with tax laws.

Can ownership of a Delaware LLC be transferred through a sale or assignment?

Yes, ownership of a Delaware LLC can be transferred through a sale or assignment of membership interests.

What are the implications of transferring ownership of a Delaware LLC to a foreign entity?

Transferring ownership to a foreign entity may have tax and legal implications, so it is recommended to consult with a lawyer or tax professional.

Can ownership of a Delaware LLC be transferred to a minor?

Ownership of a Delaware LLC cannot be directly transferred to a minor, but it can be transferred to a trust for the minor’s benefit.

Can a court order be used to transfer ownership of a Delaware LLC?

In certain cases, a court order may be necessary to facilitate the transfer of ownership of a Delaware LLC, such as in cases of dispute or incapacity.

How can I protect my interests when transferring ownership of a Delaware LLC?

To protect your interests when transferring ownership of a Delaware LLC, it is important to carefully review and update the operating agreement, seek legal advice, and ensure all necessary paperwork is filed with the state of Delaware.

What are the consequences of failing to properly transfer ownership of a Delaware LLC?

Failing to properly transfer ownership of a Delaware LLC can lead to legal disputes, tax issues, and other complications, so it is important to follow the correct procedures.

Can I transfer ownership of a Delaware LLC without informing the state?

No, in Delaware, you are required to file an amendment with the Division of Corporations to officially transfer ownership of the LLC.

What documents do I need to transfer ownership of a Delaware LLC?

You will need to file an amendment to the Certificate of Formation, an updated Operating Agreement, and any related transfer documents.

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 Delaware, 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 Delaware 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.