QUESTION
multi member LLC to single ownership
Asked on Sep 10th, 2014 on Business Law - Pennsylvania
More details to this question:
We are two partner LLC, me and my partner. We have registered with state of PA. We have not conducted any business yet. I want to sell my stake to my partner and want to get out of the LLC. He is ready to buy me out. With that he will be the sole owner of the LLC. We have a clause in our operating agreement that we can buy/sell with mutual agreement. What will the process to do that? Any tax liabilities as we have registered as multi member LLC? Which documents do we need to file with state to resolve this.
1 ANSWER
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There should be no tax ramifications resulting from this transaction. It would be a good idea to document the transaction with a simple written agreement, signed by both of you and notarized. Have two originals prepared so that each of you has one when done. If you have a tax ID number from the IRS, you might need to write the IRS about the transaction and remove yourself from any tax filings there (which might include the SS-4 form that you filed and the Form 2553 if you filed for S-status. With the state, you should file a Changes docketing statement removing yourself as an officer. You can also file a new PA-100 with the Pa Department of Revenue to notify the department of a change in membership/ownership and officers. Keep copies of all of these documents for future reference. The public records can be frustratingly difficult to change for good. Your name can continue to appear as associated with the LLC for years to come. Having good copies of all of the documents proving that you exited as a member could be important to have in the future.
Answered on Sep 22nd, 2014 at 2:49 PM