How to Transfer LLC Ownership in Michigan: 2024 Updates

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

How an LLC Ownership Structure Works in Michigan

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 Michigan 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 Michigan 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 Michigan.

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

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

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

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

Sell a Michigan 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 Michigan state laws.

How to Transfer Michigan 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 Michigan 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 Michigan LLC Operating Agreement

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

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

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

The Role of Michigan Operating Agreement in LLC Ownership Transfer

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

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

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

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

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

Dissolution of Michigan 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 Michigan LLC?

To transfer ownership of your Michigan LLC, you must amend the Articles of Organization with the new ownership information.

Can I transfer ownership of my Michigan LLC to another person?

Yes, in Michigan, you can transfer ownership of your LLC to another person by following the legal procedures for transferring ownership.

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

Yes, you need to amend the Articles of Organization with the state of Michigan to reflect the new ownership of your LLC.

Are there any fees associated with transferring ownership of a Michigan LLC?

Yes, there may be filing fees associated with amending the Articles of Organization to transfer ownership of your Michigan LLC.

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

The time it takes to transfer ownership of a Michigan LLC can vary, but it typically involves filing the necessary paperwork with the state.

What is the process for transferring ownership of a Michigan LLC?

The process typically involves amending the Articles of Organization with the new ownership information and submitting the necessary paperwork to the state of Michigan.

Can I transfer partial ownership of my Michigan LLC?

Yes, in Michigan, you can transfer partial ownership of your LLC to another party.

Do I need to get approval from the other LLC members before transferring ownership in Michigan?

Depending on the operating agreement of your Michigan LLC, you may need approval from the other members before transferring ownership.

What happens to the liabilities of the Michigan LLC when transferring ownership?

When transferring ownership of a Michigan LLC, liabilities and obligations are typically transferred to the new owner.

Can I transfer ownership of my Michigan LLC to a non-resident of the state?

Yes, you can transfer ownership of your Michigan LLC to a non-resident, but you may need to comply with certain state regulations.

Do I need an attorney to help me transfer ownership of my Michigan LLC?

While it’s not required, hiring an attorney to help with the transfer of ownership of your Michigan LLC can help ensure the process is done correctly.

What documents do I need to transfer ownership of my Michigan LLC?

You will typically need to complete an Amendment to Articles of Organization form and any other necessary paperwork required by the state of Michigan.

Can I transfer ownership of my Michigan LLC to a family member?

Yes, you can transfer ownership of your Michigan LLC to a family member, as long as you follow the proper legal procedures.

Are there tax implications when transferring ownership of a Michigan LLC?

There may be tax implications when transferring ownership of a Michigan LLC, so it’s important to consult with a tax professional.

What are the consequences of not properly transferring ownership of my Michigan LLC?

Failing to properly transfer ownership of your Michigan LLC could result in legal issues and complications for the business.

Can I transfer ownership of my Michigan LLC online?

Depending on the state of Michigan’s online filing system, you may be able to transfer ownership of your LLC online.

Is there a deadline for transferring ownership of a Michigan LLC?

While there may not be a specific deadline, it’s important to complete the transfer of ownership process in a timely manner to avoid any legal complications.

Can I sell my Michigan LLC to a third party?

Yes, you can sell your Michigan LLC to a third party, but you will need to follow the legal procedures for transferring ownership.

What information do I need to provide when transferring ownership of my Michigan LLC?

You will need to provide the new owner’s information, as well as any other relevant details required by the state of Michigan.

Can I transfer ownership of my Michigan LLC if there are debts or obligations?

Yes, you can transfer ownership of your Michigan LLC even if there are debts or obligations, but they will typically transfer to the new owner.

Are there any restrictions on transferring ownership of a Michigan LLC?

While there may not be specific restrictions, you will need to comply with Michigan’s LLC laws and regulations when transferring ownership.

Can I transfer ownership of my Michigan LLC without the consent of the other members?

Depending on your operating agreement, you may need the consent of the other members of your Michigan LLC before transferring ownership.

What role does the operating agreement play in transferring ownership of a Michigan LLC?

The operating agreement outlines the procedures for transferring ownership of a Michigan LLC and may require the consent of the other members.

Can I transfer ownership of my Michigan LLC if it is involved in a lawsuit?

Transferring ownership of a Michigan LLC that is involved in a lawsuit can be complicated, so it’s important to consult with legal counsel.

What happens to the intellectual property of my Michigan LLC when transferring ownership?

When transferring ownership of a Michigan LLC, the intellectual property rights typically transfer to the new owner along with the business.

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

Yes, you can transfer ownership of your Michigan LLC to a trust, but you will need to follow the legal procedures for transferring ownership to a trust.

How can I ensure a smooth transition when transferring ownership of my Michigan LLC?

To ensure a smooth transition when transferring ownership of your Michigan LLC, it’s important to follow all legal procedures and communicate effectively with all parties involved.

What should I do if I am unsure about how to transfer ownership of my Michigan LLC?

If you are unsure about how to transfer ownership of your Michigan LLC, it’s recommended to seek guidance from an attorney or other legal professional familiar with Michigan’s LLC laws.

Why would someone want to transfer ownership of a Michigan LLC?

An owner may want to transfer ownership due to retirement, changes in personal circumstances, or a desire to bring in new partners.

Can I transfer ownership of my Michigan LLC without notifying the state?

No, in Michigan, you are required to update the state on any changes in ownership by filing articles of amendment with the Department of Licensing and Regulatory Affairs.

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 Michigan, 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 Michigan 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.