One of the reasons that many business owners choose to form their LLCs in Delaware is because of the business-friendly laws of the state. There are plenty of reasons to form your entity in Delaware but the ease of adding or removing members may be a great benefit to companies just starting off or who anticipate ownership changes.
Delaware Entities Do Not Provide Membership Details to the State
The state of Delaware requires minimal information from business owners in order to form a new LLC (here's how to form an LLC). Member names and ownership shares are not provided to the Delaware Division of Corporations. This data is kept internally with the LLC and may be changed via an internal vote to update the Operating Agreement.
Some states require changes in membership be submitted to the state via an amendment to your formation document (with some inevitable fees paid). Delaware has no such requirement. Changes made to your membership may be made by the existing members with no notification to the Delaware Division of Corporations.
If you form an LLC with The Incorporators Ltd., we request manager and membership information for our records and provide you with a standard operating agreement.
The initial manager(s) will be included on the Statement of Incorporator, a document we provide you which defines who has the authority to hold the organizational meeting of the members.
If you form your entities with us we send you all of the paperwork you'll need to have a fully functioning company. You can get started by forming a Delaware LLC here.
How to Change the Members of a Delaware LLC
Initial members of an LLC sign an Operating Agreement. Delaware LLC existing members may make changes to membership by following the steps set forth in the LLC Operating Agreement.
A new member is essentially purchasing a percentage of the company. Their contribution would determine their percentage of ownership. There could also be circumstances where one member is selling their membership to someone else or selling it back to the company. In order for any of these actions to take place, they must first be approved by the existing members and documented in the company minutes.
The Operating Agreement includes a Schedule A, which is a list of Members’ names and addresses, their capital contribution and percentage of interest in the company. This schedule would be updated to reflect any changes in membership.
Members are issued a membership certificate with the percentage of ownership listed (similar to a stock certificate). The company membership directory would then be updated. If you need membership certificates and a membership directory, you can purchase them from us here, whether or not you formed your company with us.
That's it! The changes to LLC membership are all done internally, making it easier (and more cost effective) to change members of a Delaware LLC than it is in many other states.
If your company needs supplies to assist you in making these changes, you can find organizational supplies such as company binders, minute books, embossed seals, digital company seals, and more in our store here.
What to do Once You Change the Members of Your LLC
Though membership changes are documented internally, you may still need to notify your bank and registered agent if you have removed a member and they were the main contact person or if a new member becomes the primary contact person. Remember, keeping your Registered Agent informed of changes of address or contact information is key to keeping your company in good standing. Additionally, you may have to update the responsible party listed with the IRS for the Employer Identification Number (EIN).
If you have an questions, feel free to contact us or give us a call at 800-223-3928.
DISCLAIMER: The Incorporators LTD. is a business formation service company only.
All content on this site is for informational purposes only and should not be construed as legal, taxation or financial advice or services.