How to Transfer LLC Ownership in Texas: 2024 Updates


Steve Bennett
Steve Bennett
Business Formation Expert
Steve runs LLCBuddy, helping entrepreneurs set up their LLCs easily. He offers clear guides, articles, and FAQs to simplify the process. His team keeps everything accurate and current, focusing on state rules, registered agents, and compliance. Steve’s passion for helping businesses grow makes LLCBuddy a go-to resource for starting and managing an LLC.

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Transfer LLC ownership in Texas

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

How an LLC Ownership Structure Works in Texas

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 Texas 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 Texas 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 Texas.

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

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

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

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

Sell a Texas 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 Texas state laws.

How to Transfer Texas 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 Texas 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 Texas LLC Operating Agreement

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

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

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

The Role of Texas Operating Agreement in LLC Ownership Transfer

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

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

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

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

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

Dissolution of Texas 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 a Texas LLC?
You can transfer ownership of a Texas LLC by filing an amendment to the Certificate of Formation with the Texas Secretary of State.
Do I need to notify the state of Texas when transferring ownership of an LLC?
Yes, you must notify the Texas Secretary of State when transferring ownership of an LLC through an amendment to the Certificate of Formation.
Can I transfer ownership of a Texas LLC without, making any official filings?
No, transferring ownership of a Texas LLC requires filing documents with the Texas Secretary of State to make the transfer official.
How long does it take to transfer ownership of a Texas LLC?
The time it takes to transfer ownership of a Texas LLC depends on the filing process with the Texas Secretary of State, which can typically take a few weeks.
Can I transfer ownership of a Texas LLC to a non-Texas resident?
Yes, you can transfer ownership of a Texas LLC to a non-Texas resident, but the LLC must still file documents with the Texas Secretary of State to make the transfer official.
Do I need to get approval from the state of Texas before transferring ownership of an LLC?
You do not need specific approval from the state of Texas to transfer ownership of an LLC, but you do need to file official documents with the Texas Secretary of State.
Are there any taxes or fees associated with transferring ownership of a Texas LLC?
There may be filing fees associated with transferring ownership of a Texas LLC through the Texas Secretary of State, but there are no specific transfer taxes.
Can I transfer ownership of a Texas LLC to multiple new owners at once?
Yes, you can transfer ownership of a Texas LLC to multiple new owners at once, but each new owner must be listed in the official filing with the Texas Secretary of State.
What happens if I do not transfer ownership of my Texas LLC properly?
If you do not transfer ownership of your Texas LLC properly, the transfer may not be legally recognized, and the previous owners could still be considered responsible for the LLC.
Can I transfer ownership of a Texas LLC to a family member?
Yes, you can transfer ownership of a Texas LLC to a family member, but the transfer must still be made official through filings with the Texas Secretary of State.
Do I need to have a written agreement when transferring ownership of a Texas LLC?
It is recommended to have a written agreement when transferring ownership of a Texas LLC to ensure all parties understand the transfer and their obligations.
Can I transfer ownership of a Texas LLC to a business entity?
Yes, you can transfer ownership of a Texas LLC to a business entity, but the transfer must still be approved and recorded through filings with the Texas Secretary of State.
Can I transfer ownership of a Texas LLC if there are pending lawsuits against the LLC?
Transferring ownership of a Texas LLC while there are pending lawsuits may complicate the transfer, so it’s recommended to consult with legal counsel before proceeding.
Can I transfer ownership of a Texas LLC to a minor?
Transferring ownership of a Texas LLC to a minor may have legal implications, so it’s recommended to consult with legal counsel before proceeding with such a transfer.
Can I reverse the transfer of ownership of a Texas LLC?
Reversing the transfer of ownership of a Texas LLC may be complicated and would require legal assistance, depending on the circumstances of the transfer.
Can I transfer ownership of a Texas LLC if there are outstanding debts?
Transferring ownership of a Texas LLC when there are outstanding debts may require consulting with legal counsel to ensure that the transfer is made legally and ethically.
Can I transfer ownership of a Texas LLC to a non-US citizen?
Yes, you can transfer ownership of a Texas LLC to a non-US citizen, but the specific details may vary depending on the immigration status of the new owner.
Can I transfer ownership of a Texas LLC without notifying the other members?
Transferring ownership of a Texas LLC typically requires agreement from all members, so it’s recommended to notify and coordinate with all parties involved in the transfer.
Can I transfer ownership of a Texas LLC to a trust?
Yes, you can transfer ownership of a Texas LLC to a trust, but the transfer must still be made official through filings with the Texas Secretary of State and by following the trust’s guidelines.
Can I transfer ownership of a Texas LLC to a charitable organization?
Yes, you can transfer ownership of a Texas LLC to a charitable organization, but the transfer must still be made official through filings with the Texas Secretary of State and follow the organization’s guidelines.
Can I transfer ownership of a Texas LLC to a spouse?
Transferring ownership of a Texas LLC to a spouse is allowed, but it’s recommended to have a written agreement and file the transfer officially with the Texas Secretary of State.
Can I transfer ownership of a Texas LLC after the death of an owner?
Transferring ownership of a Texas LLC after the death of an owner typically requires legal assistance and following specific procedures outlined in the LLC operating agreement or state law.
Can I merge two Texas LLCs with different owners into one entity?
Merging two Texas LLCs with different owners into one entity can be done, but the owners must agree to the merger, and the proper filings must be made with the Texas Secretary of State.
Can I transfer ownership of a Texas LLC if there is an operating agreement in place?
The transfer of ownership of a Texas LLC must align with the terms and conditions outlined in the operating agreement, so it’s recommended to review the agreement before proceeding with a transfer.
Can I transfer ownership of a Texas LLC if the business is facing bankruptcy?
Transferring ownership of a Texas LLC when facing bankruptcy or insolvency may require consulting with legal counsel to ensure the transfer is done in compliance with bankruptcy laws.
Can I transfer ownership of a Texas LLC to an entity registered in another state?
Yes, you can transfer ownership of a Texas LLC to an entity registered in another state, but the transfer must still be made official through filings with both states’ respective governing bodies.
Can I transfer ownership of a Texas LLC through a stock sale instead of an asset sale?
The method of transferring ownership of a Texas LLC (stock sale vs. asset sale) typically depends on the specifics of the transfer and the terms outlined in the operating agreement, so be sure to consult with legal counsel.
Can I transfer ownership of a Texas LLC to a former employee?
Transferring ownership of a Texas LLC to a former employee may require legal consultation to ensure that the transfer is done fairly and in compliance with employment laws and tax regulations.
Can I transfer ownership of a Texas LLC to a creditor in exchange for debt forgiveness?
Transferring ownership of a Texas LLC to a creditor in exchange for debt forgiveness may be a strategic option, but it’s recommended to consult with legal and financial advisors beforehand.
Can I transfer ownership of a Texas LLC to a partnership?
Yes, you can transfer ownership of a Texas LLC to a partnership, but the transfer must be made official through the proper filings with the Texas Secretary of State, and all partners must agree to the transfer.

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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 Texas, 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 Texas 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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