Transferring Ownership from LLC “A” to LLC “B”: Doing It the Right Way

It’s common for business owners to reach a point where they want to restructure how their ownership interests are held. Often, that means transferring an individual’s ownership in an existing LLC (“LLC A”) to another LLC or holding company (“LLC B”) for purposes of liability protection, tax planning, or overall organization.

Unfortunately, many business owners assume this process is as simple as revising the operating agreement for LLC A to reflect the new ownership under LLC B. While updating the operating agreement is an important step, it is not, by itself, sufficient to legally transfer ownership.

Why the Operating Agreement Isn’t Enough

The operating agreement governs the internal operations and relationships among members, but it does not, on its own, effectuate a change in ownership. In other words, revising an operating agreement without a proper transfer document is like changing a name on paper without transferring the title—it doesn’t establish legal ownership.

The Role of the Assignment

To properly complete the transfer, the current individual member must execute a written Assignment of Membership Interest (or “Assignment of LLC Interest”). This document formally transfers the individual’s ownership interest in LLC A to LLC B (or whichever entity will now hold the interest).

A well-drafted assignment typically includes:

• The name of the assignor (the individual transferring the interest)

• The name of the assignee (the receiving LLC or holding company)

• A description of the ownership interest being transferred

• The effective date of the transfer

• Acknowledgment of acceptance by the assignee

  
  

Once executed, this assignment serves as the legal instrument completing the transfer of ownership. Only after the assignment is in place should the operating agreement be amended to reflect the new ownership structure.

Why This Step Matters

Failing to execute a proper assignment can create serious legal and tax complications down the line. Without a valid transfer document:

• The ownership may still legally rest with the individual, even if everyone “believes” it belongs to the holding company.

• Liability protections expected from the holding company structure may not apply.

• Future transactions, distributions, or tax filings could be challenged or invalidated.

  
  

A simple oversight now can cause significant issues later — especially if the business is sold, audited, or becomes involved in litigation.

The Smart Approach: Consult a Qualified Business Attorney

Restructuring ownership between entities isn’t just paperwork; it’s a legal transaction that should be handled carefully. A qualified business attorney can:

• Draft the assignment of membership interest

• Review and revise the operating agreement

• Ensure compliance with state law and the LLC’s governing documents

• Advise on related tax and liability considerations

  
  

At Hoffman Law Offices, LLC, we regularly assist business owners in structuring and formalizing ownership transfers between entities. Whether you’re creating a holding company, restructuring for liability protection, or simply organizing your interests more effectively, we ensure your documentation and filings are done right — the first time.

The bottom line:Transferring ownership from LLC A to LLC B requires more than an edit to your operating agreement. Make sure your transfer is legally complete, properly documented, and strategically sound.

Disclaimer: This blog post is provided for informational purposes only and does not constitute legal, tax, or financial advice. Reading this article does not create an attorney–client relationship with Hoffman Law Offices, LLC or any of its attorneys. You should consult a qualified attorney before making decisions regarding your specific situation.