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What to Look for When Changing Ownership

Jeff Coppaken July 18, 2016

A change of ownership can represent an exciting time for a business.

Businesses in Kansas City are constantly changing ownership structures for many different reasons. It could be the result of a capital injection, a new hire or an exit. Regardless of whether you’re selling an interest in your business, giving it away or allowing someone to work for your company in exchange for equity, you’ll need proper documentation of the change.

It’s important to note that when you register an LLC, each member listed is presumed to be an equal owner in the company. In fact, in the absence of an operating agreement, many states will by statute assign ownership percentages on a pro rata — or equal proportion — basis.

For example, a three-member LLC without an operating agreement would be presumed to be an even split of a third per member. That presumption can of course be trumped by an operating agreement, which is incredibly important.

If you want to change ownership in your company, the first thing you have to do is look to your governing documents for guidance. Properly drafted documents will provide the steps to change an ownership interest or reallocate the company’s assets.

If you don’t have an operating agreement or if your operating agreement has never been updated, you will need to proceed with caution. It’s advised that you speak to an attorney immediately in these instances. A change in ownership could involve a vote from each of the members, partners or shareholders, and may require a special meeting for the occasion. Make sure there’s written documentation of such a vote.

In short, selling an interest in your company is a thrilling experience, but not a time to kick back and let things “work themselves out.” You should have the proper tax and legal advice before making any changes in the ownership interest of your company.

If you need a business lawyer in Kansas City, contact Jeff today.