How to add or remove members from a Delaware LLC
How is the change in membership documented?
The names of LLC members are typically not filed with the State of Delaware. Therefore, there is no amendment that needs to be filed with the Delaware Division of Corporations or your Registered Agent to add or remove members from a Delaware LLC. The names of the members are contained in the company’s LLC Operating Agreement, and that is where the change should be documented in order for it to be recognized.
Who do you need to notify of the change?
The Delaware LLC is a “contractual entity.” This means members of the LLC derive their ownership interest from the LLC Operating Agreement they enter into with each other. Most LLC agreements provide that all members must consent to the transfer of another member’s ownership interest for the new member to be a voting member. Therefore, it is important when adding a member to have all members sign-off on the new LLC Operating Agreement. The first new agreement is typically called the “First Amended and Restated LLC Operating Agreement”, since it was both changed and restated in its entirety to replace the previous agreement.
The same holds true when removing a member. It is important to have the resigning member acknowledge the terms whereby that member is leaving the LLC in writing, such as the amount paid for the interest and to whom the interest is being transferred. After the member signs the resignation and transfer acknowledgment, the remaining members sign a First Amended and Restated LLC Operating Agreement documenting the change to make it effective. Subsequent transfers would be listed in order, for example the next change would be contained in a “Second Amended and Restated LLC Operating Agreement” and so on.
About the author
John LegarÃ© Williams, Esquire practices business law through The Williams Law Firm, P.A. (www.TrustWilliams.com). He is also President of Agents and Corporations, Inc. (www.IncNow.com), a family owned and operated incorporation service that provides filing and registered agent services in Delaware to business owners from around the world. Nationally, Mr. Williams is a frequent speaker nationally on the topic of Delaware LLCs and in particular the Delaware Series LLC, the most cutting-edge entity on the market.