How to Transfer LLC Ownership in Tennessee: 2025 Updates


Steve Bennett
Steve Bennett
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Transfer LLC ownership in Tennessee

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

How an LLC Ownership Structure Works in Tennessee

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 Tennessee 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 Tennessee 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 Tennessee.

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

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

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

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

Sell a Tennessee 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 Tennessee state laws.

How to Transfer Tennessee 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 Tennessee 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 Tennessee LLC Operating Agreement

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

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

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

  1. Death of the LLC owner
  2. Separation or Divorce of the LLC Owners
  3. LLC owners do not wish to continue their association with the organization
  4. LLC owners want to appoint a new member (owner)
  5. 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 Tennessee. Transferring LLC ownership requires a comprehensive LLC operating agreement in Tennessee. This is an internal document every LLC should have at the time of formation. 

The Role of Tennessee Operating Agreement in LLC Ownership Transfer

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

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

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

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

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

Dissolution of Tennessee 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 Tennessee LLC?
Ownership of a Tennessee LLC can be transferred by following the operating agreement or by obtaining written consent from all members.
Can I sell my ownership stake in a Tennessee LLC?
Yes, you can sell your ownership stake in a Tennessee LLC, but the transfer would need to be approved by the other members.
Do I need to update the Tennessee Secretary of State with the new ownership information?
Yes, the Tennessee Secretary of State should be notified of any changes in ownership of a Tennessee LLC.
Can I transfer my ownership in a Tennessee LLC without the consent of the other members?
Generally, the transfer of ownership in a Tennessee LLC requires the consent of all members, unless otherwise specified in the operating agreement.
How do I determine the value of my ownership stake in a Tennessee LLC?
The value of an ownership stake in a Tennessee LLC can be determined through negotiations with the other members or by hiring a professional business valuator.
Are there any specific forms I need to file with the state of Tennessee when transferring ownership of an LLC?
Tennessee requires LLCs to file a Certificate of Amendment to update ownership information with the Secretary of State.
How long does it take to process ownership transfer documentation in Tennessee?
The processing time for ownership transfer documentation in Tennessee varies, but it typically takes a few weeks.
Can a Tennessee LLC be transferred to a different company or entity?
Yes, ownership of a Tennessee LLC can be transferred to a different company or entity, with the approval of the other members.
Will I need to update the registered agent information with the state of Tennessee after transferring ownership of an LLC?
Yes, you will need to update the registered agent information with the state of Tennessee when transferring ownership of an LLC.
What are the tax implications of transferring ownership of a Tennessee LLC?
The tax implications of transferring ownership of a Tennessee LLC may vary based on various factors, such as the structure of the transfer and the tax status of the LLC.
Can the operating agreement of a Tennessee LLC restrict the transfer of ownership interests?
Yes, the operating agreement of a Tennessee LLC can include provisions that restrict or govern the transfer of ownership interests.
Will I need to update any business licenses or permits in Tennessee after transferring ownership of an LLC?
Yes, you may need to update any necessary business licenses or permits in Tennessee after transferring ownership of an LLC.
Can ownership of a Tennessee LLC be transferred as part of an estate plan?
Yes, ownership of a Tennessee LLC can be transferred as part of an estate plan, subject to any restrictions outlined in the operating agreement.
Do I need to notify creditors of a Tennessee LLC when transferring ownership?
It is generally a good practice to notify creditors of a Tennessee LLC when transferring ownership, especially if the transfer affects the LLC’s financial responsibilities.
Can ownership of a Tennessee LLC be transferred to a trust?
Yes, ownership of a Tennessee LLC can be transferred to a trust, subject to the rules and regulations governing trust ownership in Tennessee.
Do I need to update the internal records of the Tennessee LLC when transferring ownership?
Yes, it is important to update the internal records of the Tennessee LLC when transferring ownership to reflect the new ownership structure.
Can a Tennessee LLC be transferred to a non-resident alien?
Yes, ownership of a Tennessee LLC can be transferred to a non-resident alien, subject to any applicable immigration and tax laws.
Are there any restrictions on transferring ownership of a Tennessee LLC to a foreign entity?
There may be restrictions on transferring ownership of a Tennessee LLC to a foreign entity, depending on the type of business and industry regulations.
Can ownership of a Tennessee LLC be gifted to another individual?
Yes, ownership of a Tennessee LLC can be gifted to another individual, subject to any gift tax implications.
Can a minor be a member of a Tennessee LLC after ownership transfer?
While minors can hold ownership interests in a Tennessee LLC, it is highly advisable to seek legal counsel to navigate the complexities of such a transfer involving a minor.
Can ownership of a Tennessee LLC be transferred in stages?
Ownership of a Tennessee LLC can be transferred in stages, as long as all involved parties agree to the terms of the transfer.
Are there any legal requirements for transferring ownership of a Tennessee LLC?
Yes, there are legal requirements for transferring ownership of a Tennessee LLC, including following the operating agreement and updating state filings.
Can ownership of a Tennessee LLC be split among several individuals or entities?
Yes, ownership of a Tennessee LLC can be split among several individuals or entities, as long as the ownership percentages are clearly defined in the operating agreement.
Is there a deadline for completing the ownership transfer of a Tennessee LLC?
While there may not be a specific deadline for completing the ownership transfer of a Tennessee LLC, it is advisable to complete the transfer in a timely manner to avoid any legal or financial complications.
Can I provide financing for the purchase of ownership in a Tennessee LLC?
Yes, you can provide financing for the purchase of ownership in a Tennessee LLC, subject to agreement from the relevant parties involved.
Can ownership of a Tennessee LLC be transferred back to the original owner?
Yes, ownership of a Tennessee LLC can be transferred back to the original owner, subject to any applicable restrictions outlined in the operating agreement.
Do I need to draft a formal agreement for transferring ownership of a Tennessee LLC?
It is highly recommended to draft a formal agreement for transferring ownership of a Tennessee LLC to clearly outline the terms and conditions of the transfer.
Can ownership of a Tennessee LLC be transferred through a buyout agreement?
Yes, ownership of a Tennessee LLC can be transferred through a buyout agreement, where one or more members agree to buy out the ownership interests of another member.
Can a Tennessee LLC be dissolved after transferring ownership?
A Tennessee LLC can be dissolved after transferring ownership, subject to compliance with the dissolution procedures outlined in the operating agreement and state laws.
Can I transfer ownership of my Tennessee LLC to another person?
Yes, you can transfer ownership of your Tennessee LLC to another person.

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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 Tennessee, 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 Tennessee 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.

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