How to Transfer LLC Ownership in Minnesota: 2024 Updates

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

How an LLC Ownership Structure Works in Minnesota

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 Minnesota 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 Minnesota 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 Minnesota.

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

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

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

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

Sell a Minnesota 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 Minnesota state laws.

How to Transfer Minnesota 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 Minnesota 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 Minnesota LLC Operating Agreement

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

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

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

The Role of Minnesota Operating Agreement in LLC Ownership Transfer

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

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

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

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

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

Dissolution of Minnesota 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 Minnesota LLC?

To transfer ownership of your Minnesota LLC, all current members must agree on the transfer and then update the articles of organization with the Secretary of State.

Is there a specific form I need to use to transfer ownership of my Minnesota LLC?

Yes, you will need to file an Amendment to Articles of Organization form with the Secretary of State to finalize the ownership transfer.

What information do I need to include in the Amendment to Articles of Organization form for a Minnesota LLC ownership transfer?

You will need to include the names and addresses of the old and new LLC members, the effective date of the ownership transfer, and any changes to the LLC’s operating agreement.

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

Yes, there is a fee for filing the Amendment to Articles of Organization form with the Minnesota Secretary of State, which can vary depending on the type of ownership transfer.

Can I transfer ownership of my Minnesota LLC to a non-citizen?

Yes, you can transfer ownership of your Minnesota LLC to a non-citizen, but they will need to comply with any additional state or federal requirements for foreign ownership.

Do I need to update my Minnesota LLC’s operating agreement when transferring ownership?

It is recommended to update your Minnesota LLC’s operating agreement when transferring ownership to reflect the new ownership structure and member roles.

Can a Minnesota LLC be transferred to a trust?

Yes, a Minnesota LLC can be transferred to a trust, but you will need to update the ownership information with the Secretary of State and comply with any trust formation requirements.

What happens if I don’t update the ownership information of my Minnesota LLC with the Secretary of State?

Failure to update the ownership information of your Minnesota LLC with the Secretary of State can result in legal complications and potential liability issues for the current and new members.

How long does it take to process an ownership transfer for a Minnesota LLC?

The processing time for an ownership transfer of a Minnesota LLC can vary, but it generally takes a few weeks for the Secretary of State to approve the Amendment to Articles of Organization form.

Can I sell my ownership stake in a Minnesota LLC without the consent of other members?

In Minnesota, the operating agreement of the LLC often dictates the process for selling ownership stakes, including whether or not the consent of other members is required.

Are there any residency requirements for LLC members in Minnesota?

There are no specific residency requirements for LLC members in Minnesota unless otherwise specified in the LLC’s operating agreement or articles of organization.

Can I transfer ownership of my Minnesota LLC if the LLC is facing financial difficulties?

Yes, you can transfer ownership of your Minnesota LLC even if the LLC is facing financial difficulties, but it is important to disclose any financial issues to potential buyers.

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

Yes, you can transfer ownership of your Minnesota LLC to a family member, but you will still need to follow the proper procedures for updating the ownership information with the Secretary of State.

Are LLC ownership transfers in Minnesota subject to taxation?

In Minnesota, LLC ownership transfers are generally not subject to sales tax, but you may need to consult with a tax professional to determine if there are any other tax implications.

Can a Minnesota LLC be transferred to a corporation?

Yes, a Minnesota LLC can be transferred to a corporation, but the transfer process may be more complex due to different ownership structures and legal requirements for corporations.

Can I transfer ownership of my Minnesota LLC to a minor?

It is not recommended to transfer ownership of a Minnesota LLC to a minor, as they may not have the legal capacity to enter into binding contracts or make business decisions.

Can a Minnesota LLC operating agreement prohibit or limit ownership transfers?

Yes, a Minnesota LLC operating agreement can include provisions that restrict or limit ownership transfers, such as requiring approval from other members or setting conditions for transfers.

Can I transfer ownership of my Minnesota LLC if it has outstanding debts or obligations?

Yes, you can transfer ownership of your Minnesota LLC even if it has outstanding debts or obligations, but the new owner will inherit these responsibilities unless stated otherwise.

Can a Minnesota LLC have multiple owners with varying ownership percentages?

Yes, a Minnesota LLC can have multiple owners with varying ownership percentages, as long as the ownership percentages are clearly documented in the operating agreement and updated with the Secretary of State.

Can I reverse a transfer of ownership for my Minnesota LLC after it has been completed?

It may be possible to reverse a transfer of ownership for your Minnesota LLC if both parties agree to it, but you may need to file additional paperwork and update the records with the Secretary of State.

Can I transfer ownership of my Minnesota LLC to a business entity registered in another state?

Yes, you can transfer ownership of your Minnesota LLC to a business entity registered in another state, but you will need to comply with any registration and reporting requirements for foreign entities in Minnesota.

Are there any restrictions on who can be a member of a Minnesota LLC?

There are generally no restrictions on who can be a member of a Minnesota LLC, as long as they meet the legal requirements for business ownership and any specific requirements outlined in the operating agreement.

Can I transfer ownership of my Minnesota LLC to a nonprofit organization?

Yes, you can transfer ownership of your Minnesota LLC to a nonprofit organization, but you will need to ensure that the nonprofit organization is eligible to own and operate a business in Minnesota.

Can I transfer ownership of my Minnesota LLC to a partnership?

Yes, you can transfer ownership of your Minnesota LLC to a partnership, but you will need to update the ownership information with the Secretary of State and comply with any partnership formation requirements.

Can I transfer ownership of my Minnesota LLC to a non-profit individual?

Yes, you can transfer ownership of your Minnesota LLC to a non-profit individual, as long as they meet the legal requirements for business ownership and any specific requirements outlined in the operating agreement.

Do I need to update the registered agent information for my Minnesota LLC when transferring ownership?

Yes, it is important to update the registered agent information for your Minnesota LLC when transferring ownership to ensure that the new owners receive important legal and tax documents.

Can I transfer ownership of my Minnesota LLC to an out-of-state individual?

Yes, you can transfer ownership of your Minnesota LLC to an out-of-state individual, but they will need to comply with any additional state or federal requirements for owning a business in Minnesota.

Can I transfer ownership of my Minnesota LLC to a legal entity based outside of the United States?

Yes, you can transfer ownership of your Minnesota LLC to a legal entity based outside of the United States, but you may need to comply with additional reporting and registration requirements for foreign entities in Minnesota.

Can a member of a Minnesota LLC transfer their ownership interest to someone else without the consent of the other members?

In Minnesota, the LLC’s operating agreement often dictates the process for transferring ownership interests, including whether or not the consent of other members is required.

How do I transfer ownership of a Minnesota LLC?

To transfer ownership of a Minnesota LLC, you will need to follow the guidelines outlined in the operating agreement or state laws governing LLCs.

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 Minnesota, 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 Minnesota 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.