How to Transfer LLC Ownership in Illinois: 2025 Updates

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

How an LLC Ownership Structure Works in Illinois

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 Illinois 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 Illinois 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 Illinois.

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

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

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

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

Sell a Illinois 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 Illinois state laws.

How to Transfer Illinois 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 Illinois 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 Illinois LLC Operating Agreement

An operating agreement is a kind of non-mandatory document in many states. In Illinois, it is not mandatory to draft one. If you have one at the time of LLC formation in Illinois, 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 Illinois 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 Illinois Articles of Organization

Changing/transferring ownership might lead to structural change at the managerial level. In that case, the LLCs must comply with the Illinois Secretary of State. To do so, one must file the Illinois 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 Illinois SOS along with other documents and the filing fee. Read how to amend Illinois 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 Illinois, 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 Illinois

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

The Role of Illinois Operating Agreement in LLC Ownership Transfer

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

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

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

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

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

Dissolution of Illinois 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 an Illinois LLC?

Ownership of an Illinois LLC can be transferred by obtaining written consent from all current members and updating the operating agreement.

Do I need to file any forms with the state of Illinois to transfer ownership of an LLC?

Yes, you may need to file an amendment to the Articles of Organization with the Illinois Secretary of State to reflect the changes in ownership.

Does Illinois require a new EIN when ownership of an LLC changes?

No, Illinois does not require a new EIN when ownership of an LLC changes.

Can I transfer ownership of an Illinois LLC without the consent of all members?

No, all members must agree to the transfer of ownership in compliance with the operating agreement.

What happens if I transfer ownership of my Illinois LLC without following the proper procedures?

If ownership of an Illinois LLC is transferred without following proper procedures, the transfer may be deemed invalid and could result in legal consequences.

Is there a specific form for transferring ownership of an Illinois LLC?

There is not a specific form for transferring ownership of an Illinois LLC, but an amendment to the Articles of Organization may be necessary.

How long does it take to transfer ownership of an Illinois LLC?

The timeline for transferring ownership of an Illinois LLC can vary depending on the complexity of the ownership transfer and if any forms need to be filed with the state.

Can an Illinois LLC operating agreement outline the process for transferring ownership?

Yes, an Illinois LLC operating agreement can outline the process for transferring ownership, including any requirements for written consent from members.

Will the transfer of ownership of an Illinois LLC affect its standing with the state of Illinois?

The transfer of ownership of an Illinois LLC may affect its standing with the state of Illinois, especially if any filings with the Secretary of State are required.

Are there any tax implications for transferring ownership of an Illinois LLC?

There may be tax implications for transferring ownership of an Illinois LLC, so it is recommended to consult with a tax professional before proceeding with the transfer.

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

Ownership of an Illinois LLC can be transferred to a non-member if all current members agree to the transfer.

Does Illinois require notification of ownership changes for an LLC?

Illinois does not require notification of ownership changes for an LLC, but updating the Articles of Organization is recommended.

Can a buyout agreement be used to transfer ownership of an Illinois LLC?

Yes, a buyout agreement can be used to transfer ownership of an Illinois LLC if all members agree to the terms.

What is the difference between transferring ownership of an Illinois LLC and assigning membership interests?

Transferring ownership of an Illinois LLC typically involves a more formal process and may require amending the operating agreement, while assigning membership interests may be a more straightforward transfer.

Can ownership of an Illinois LLC be transferred to a trust?

Ownership of an Illinois LLC can be transferred to a trust if all members agree to the transfer and the trust is designated as a member in the operating agreement.

Are there any restrictions on transferring ownership of an Illinois LLC to a foreign entity?

There may be restrictions on transferring ownership of an Illinois LLC to a foreign entity, so it is recommended to consult with legal counsel to ensure compliance.

Can ownership of an Illinois LLC be transferred to a minor?

Ownership of an Illinois LLC cannot be transferred to a minor, as minors are generally not permitted to enter into contractual agreements.

Will transferring ownership of an Illinois LLC affect its existing contracts or agreements?

Transferring ownership of an Illinois LLC may affect its existing contracts or agreements, so it is important to review any agreements before proceeding with the transfer.

Can ownership of an Illinois LLC be transferred to a corporation?

Ownership of an Illinois LLC can be transferred to a corporation if all members agree to the transfer and the corporation is designated as a member in the operating agreement.

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

There may be fees associated with transferring ownership of an Illinois LLC, such as filing fees with the Illinois Secretary of State for amendments to the Articles of Organization.

Can ownership of an Illinois LLC be transferred in stages?

Ownership of an Illinois LLC can be transferred in stages if the operating agreement allows for partial transfers and all members agree to the transfer.

Can ownership of an Illinois LLC be transferred through a gift?

Ownership of an Illinois LLC can be transferred through a gift if all current members agree to the transfer and any gift tax implications are considered.

Can ownership of an Illinois LLC be transferred if the LLC is in financial distress?

Ownership of an Illinois LLC can be transferred if the LLC is in financial distress, but it is important to consider any potential liability issues before proceeding with the transfer.

Can ownership of an Illinois LLC be transferred if there are pending lawsuits against the LLC?

Ownership of an Illinois LLC can be transferred if there are pending lawsuits against the LLC, but it is important to disclose all pending legal matters to the new owner.

Can ownership of an Illinois LLC be transferred if the LLC has outstanding debt?

Ownership of an Illinois LLC can be transferred if the LLC has outstanding debt, but it is important to address any financial obligations before completing the transfer.

Can ownership of an Illinois LLC be transferred to a single member?

Ownership of an Illinois LLC can be transferred to a single member if all other members agree to the transfer and any changes are documented in the operating agreement.

Can ownership of an Illinois LLC be transferred if the LLC is in bankruptcy?

Ownership of an Illinois LLC can be transferred if the LLC is in bankruptcy, but the transfer may be subject to approval by the bankruptcy court.

Can ownership of an Illinois LLC be transferred to a charitable organization?

Ownership of an Illinois LLC can be transferred to a charitable organization if all current members agree to the transfer and the organization is designated as a member in the operating agreement.

Can ownership of an Illinois LLC be transferred if the LLC is in the process of dissolution?

Ownership of an Illinois LLC can be transferred if the LLC is in the process of dissolution, but it is important to follow the proper procedures outlined in the operating agreement and state law.

Can I transfer ownership of my Illinois LLC?

Yes, ownership of an Illinois LLC can be transferred.

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 Illinois, 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 Illinois 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.