How to Transfer LLC Ownership in Washington: 2024 Updates

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

How an LLC Ownership Structure Works in Washington

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 Washington 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 Washington 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 Washington.

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

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

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

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

Sell a Washington 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 Washington state laws.

How to Transfer Washington 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 Washington 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 Washington LLC Operating Agreement

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

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

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

The Role of Washington Operating Agreement in LLC Ownership Transfer

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

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

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

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

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

Dissolution of Washington 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 Washington LLC?

To transfer ownership of a Washington LLC, you will need to update the ownership information in the company’s operating agreement and file the necessary paperwork with the Washington Secretary of State.

What forms do I need to submit to transfer ownership of a Washington LLC?

You will need to submit a Certificate of Amendment to the Articles of Organization to transfer ownership of a Washington LLC.

Can I transfer ownership of a Washington LLC online?

Yes, you can complete the ownership transfer process for a Washington LLC online through the Washington Secretary of State’s website.

Is there a fee to transfer ownership of a Washington LLC?

Yes, there is a filing fee associated with transferring ownership of a Washington LLC. The fee amount may vary, so it’s best to check with the Washington Secretary of State for the current fee.

Can I transfer partial ownership of a Washington LLC?

Yes, you can transfer partial ownership of a Washington LLC by updating the ownership percentages in the operating agreement and filing the necessary paperwork with the Washington Secretary of State.

Do I need to notify the Washington Secretary of State when transferring ownership of a Washington LLC?

Yes, you are required to notify the Washington Secretary of State when transferring ownership of a Washington LLC by filing a Certificate of Amendment to the Articles of Organization.

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

The processing time for transferring ownership of a Washington LLC can vary, but it typically takes a few weeks to complete the process.

What information do I need to provide when transferring ownership of a Washington LLC?

You will need to provide the names and addresses of the new LLC owners, the ownership percentages, and any other relevant information required by the Washington Secretary of State.

Can I transfer ownership of a Washington LLC to a non-resident of Washington?

Yes, you can transfer ownership of a Washington LLC to a non-resident of Washington. There are no restrictions on ownership based on residency.

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

Yes, it is important to update your Washington LLC’s operating agreement to reflect the new ownership structure after transferring ownership.

What happens to the EIN of a Washington LLC when ownership is transferred?

The EIN (Employer Identification Number) of a Washington LLC remains the same after ownership is transferred. It is not necessary to obtain a new EIN for the LLC.

Are there any tax implications when transferring ownership of a Washington LLC?

There may be tax implications when transferring ownership of a Washington LLC, so it’s recommended to consult with a tax professional or accountant to understand any potential tax consequences.

Can I transfer ownership of a Washington LLC to a family member?

Yes, you can transfer ownership of a Washington LLC to a family member. The process is similar to transferring ownership to any other individual.

What documents do I need to keep on file after transferring ownership of a Washington LLC?

After transferring ownership of a Washington LLC, you should keep copies of the updated operating agreement, the Certificate of Amendment to the Articles of Organization, and any other related documents on file for your records.

Can I transfer ownership of a Washington LLC without the consent of all members?

In most cases, transferring ownership of a Washington LLC requires the consent of all members. It’s important to follow the procedures outlined in the operating agreement and comply with Washington state laws regarding LLC ownership transfers.

Can I sell my ownership stake in a Washington LLC?

Yes, you can sell your ownership stake in a Washington LLC to another individual or entity. The sale will need to be documented in the operating agreement and filed with the Washington Secretary of State.

Do I need to publish a notice in a newspaper when transferring ownership of a Washington LLC?

It is not required to publish a notice in a newspaper when transferring ownership of a Washington LLC. The process involves updating the company records and filing the necessary paperwork with the Washington Secretary of State.

Can I transfer ownership of a Washington LLC to a trust?

Yes, you can transfer ownership of a Washington LLC to a trust. The process involved would be similar to transferring ownership to an individual, and the trust would become the new member of the LLC.

Can I transfer ownership of a Washington LLC to a corporation?

Yes, you can transfer ownership of a Washington LLC to a corporation. The ownership transfer would need to be documented and filed with the Washington Secretary of State to reflect the new entity as a member of the LLC.

What happens if I don’t transfer ownership of my Washington LLC properly?

Failing to transfer ownership of a Washington LLC properly could result in legal complications and issues with the company’s operations. It’s important to follow the required steps and update the necessary documents to ensure a smooth ownership transfer process.

Can I transfer ownership of a Washington LLC to a foreign entity?

Yes, you can transfer ownership of a Washington LLC to a foreign entity. The process involves updating the ownership information in the operating agreement and filing the necessary paperwork with the Washington Secretary of State.

Are there any specific regulations regarding ownership transfers of Washington LLCs?

Ownership transfers of Washington LLCs are governed by state laws and regulations specific to the state of Washington. It’s essential to comply with these regulations when transferring ownership to ensure the process is completed correctly.

Can I transfer ownership of a Washington LLC if there are outstanding debts or liabilities?

Before transferring ownership of a Washington LLC, it’s essential to address any outstanding debts or liabilities the company may have. These issues should be resolved before proceeding with the ownership transfer to avoid any potential complications.

Can I transfer ownership of a Washington LLC if there are pending legal issues?

It is generally not advisable to transfer ownership of a Washington LLC if there are pending legal issues. Resolving these legal matters before transferring ownership is recommended to prevent any further complications or liabilities for the new owners.

What is the role of the Washington Secretary of State in the ownership transfer process?

The Washington Secretary of State oversees the filing process for ownership transfers of Washington LLCs. It is necessary to file the required paperwork with the Secretary of State to update the ownership information and ensure compliance with state regulations.

Can I transfer ownership of a Washington LLC to a minor?

Ownership of a Washington LLC cannot be transferred directly to a minor. If you wish to transfer ownership to a minor, a legal guardian or custodian will need to hold the ownership interest on behalf of the minor until they reach the age of majority.

Can I transfer ownership of a Washington LLC to a new business partner?

Yes, you can transfer ownership of a Washington LLC to a new business partner by updating the operating agreement with the new member’s information and filing the necessary paperwork with the Washington Secretary of State.

What role does the Washington LLC’s Registered Agent play in the ownership transfer process?

The Washington LLC’s Registered Agent is responsible for accepting official documents and legal notices on behalf of the company. When transferring ownership, the Registered Agent may need to be updated to reflect any changes in ownership or management of the LLC.

Can I transfer ownership of a Washington LLC without the assistance of an attorney?

While it is possible to transfer ownership of a Washington LLC without the assistance of an attorney, it is recommended to seek legal guidance to ensure the process is completed correctly and in compliance with Washington state laws.

Can I transfer ownership of my Washington LLC?

Yes, ownership of a Washington 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 Washington, 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 Washington 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.