If you have an LLC in Wisconsin and you wish to discontinue it, you don’t always have to dissolve it. You can transfer the ownership, and it will keep running the way it was. Transferring ownership of a Limited Liability Company (LLC) in Wisconsin is a relatively simple and straightforward process involving minimal paperwork. It can be partially or fully transferred to another owner.
LLCBuddy editors shared a step-by-step guide on how to transfer ownership of an LLC in Wisconsin. The steps might seem easy and doable. However, these are general steps and might need special attention for specific cities or regions in Wisconsin. Hence, it is recommended to consult an attorney or legal expert before taking the steps.
How an LLC Ownership Structure Works in Wisconsin
By now, you must know that a limited liability company is one of the simplest forms of business structure. The ownership and transferring it to others is even simpler. For an LLC in Wisconsin or any other state in the United States, the company is considered an independent entity that is separated from its owners, which means the owners are not personally liable for the company’s debts or legal obligations.
The ownership structure of an LLC in Wisconsin is determined by the percentage of ownership interests held by each member. These ownership interests can be distributed however the members see fit and are typically outlined in the Operating Agreement drafted in Wisconsin.
There is no maximum limit on the number of members an LLC in Wisconsin can have, and the members can be individuals, other LLCs, corporations, or even foreign entities. This flexibility allows for a wide range of business structures, from single-member LLCs in Wisconsin to large, multi-member LLCs with complex ownership arrangements.
What is Wisconsin LLC Buy-Sell Agreement in Ownership Transfer?
In Wisconsin, the buy-sell agreement is a part of your operating agreement. It explains the instructions for buying and selling the LLC ownership. For example, who can be the member of Wisconsin LLC, how will buy out and sell of the LLC be determined, whether the members of the LLC in Wisconsin will buy the shares of the leaving owner, and how – these are the points you have in the buy-sell agreement.
Buy Out Wisconsin LLC or Partial Transfer: In this case, the members of the LLC generally buy the shares of the owner who is leaving. As the LLC buys the owner’s interests, the shares get divided equally among the remaining Wisconsin LLC members. LLC members must approve the transfer, and then the Operating Agreement (OA) will be updated to exclude the departed owner.
If your LLC operating agreement does not specify these terms beforehand, you must follow Wisconsin state LLC law. In some states, ownership transfer does not simply take place. Instead, they have to dissolve the LLC to continue with the process. So, while you’re forming an Wisconsin LLC, make sure to create a buy-sell agreement beforehand.
Sell a Wisconsin LLC Or Fully Transfer: Selling an LLC or Fully Transferring the ownership is a bit more complicated than the buy-out process. In this condition, owners have the independent legal right to sell the interest to any third party. They do not need other members’ approval for this. The negotiation between the buyer and the seller involves complexities if there is no operating agreement in the first place. As an owner, you must find a buyer, write the change of ownership letter, set out other formalities, and voila! Your ownership transfer is done. The parties will settle the sale contract, including the LLC price, following Wisconsin state laws.
How to Transfer Wisconsin LLC Ownership
When an LLC member decides to step down from the owner’s position, they must transfer the ownership to someone else. It can be other existing members of the LLC or a third party. Transferring LLC ownership in Wisconsin is a common yet complex deed. LLC owners who want to transfer their ownership must follow some steps to do the task. Here are the following steps-
Step 1: Review Your Wisconsin LLC Operating Agreement
An operating agreement is a kind of non-mandatory document in many states. In Wisconsin, it is not mandatory to draft one. If you have one at the time of LLC formation in Wisconsin, then it would be easier for the owners to transfer the name. If not, then it should be filed at the time of transferring ownership. The operating agreement for the LLC in Wisconsin must be reviewed for the ownership transfer conditions and other legal requirements regarding the buy-out and sale of the LLC.
Step 2: Amend the Wisconsin Articles of Organization
Changing/transferring ownership might lead to structural change at the managerial level. In that case, the LLCs must comply with the Wisconsin Secretary of State. To do so, one must file the Wisconsin Articles of Organization amendment. Specifically in Texas, LLCs must submit a Public Information Report annually to the Texas Comptroller of Public Accounts. The managerial changes will be explained there.
As soon as the ownership transfer negotiation is done and the agreement is made with the updated change of ownership, file it with the Secretary of State. For that, you must amend the Articles of Organization and get the Articles of Amendment. Make the changes to the existing Articles of Organization, get the amendment form, and submit it to the Wisconsin SOS along with other documents and the filing fee. Read how to amend Wisconsin Articles of Organization in a simple way.
Step 3: Spread the News
Once the legal formalities are done, and the ownership of your LLC is transferred officially in Wisconsin, you must spread the word to the clients, partners, and other concerned people. Also, banks and other financial institutions should be notified about the ownership change. Business entities, vendors, and other officials you work with should also be notified.
Step 4: Obtain a New EIN (optional)
You might need to apply for a new EIN based on the LLC ownership transfer. After officially transferring ownership, you must check with the IRS whether you need a new EIN. There is a formal form to notify the IRS about the LLC ownership transfer. Get the form from their website, enter the details, and submit it. You will get notified whether you need to apply for a new EIN.
Why Transfer LLC Ownership in Wisconsin
There can be several reasons why the transfer of LLC ownership in Wisconsin takes place in any organization. Some of the most common reasons include the following-
Death of the LLC owner
Separation or Divorce of the LLC Owners
LLC owners do not wish to continue their association with the organization
LLC owners want to appoint a new member (owner)
LLC owners want to sell the business off to someone else
These are some of the common reasons why an LLC ownership gets transferred in Wisconsin. Transferring LLC ownership requires a comprehensive LLC operating agreement in Wisconsin. This is an internal document every LLC should have at the time of formation.
The Role of Wisconsin Operating Agreement in LLC Ownership Transfer
Creating an Operating Agreement in Wisconsin is one of the major steps in forming a limited liability company (LLC). However, many states do not require an Operating Agreement. California, New York, Delaware, Maine, Nebraska, and Missouri are the states where an LLC operating agreement is mandatory.
Even when your state does not necessarily need you to file the operating agreement, it is recommended that you should have it to avoid any internal disagreements or issues in the future.
LLCBuddy Editorial Team
An operating agreement is an internal document explaining all the procedures, including ownership transfer, dissolution, LLC operation, members, and other LLC-related processes. Operations, such as dissolution and ownership transfer, occur based on those written regulations.
If there is no Wisconsin Operating Agreement or it does not have clear ownership transfer or buy-sell agreement provisions, the transfer takes place based on Wisconsin state law.
What to Include in Wisconsin Operating Agreement
This official document outlines the company’s structure, the members’ details, the dissolution process, and a lot more. Hence, it is always wise to have one to avoid any confusion in the future, whether your state needs it or not. The LLC operating agreement should have the following points-
Whether LLC members are related to each other and what type of relationships they share
Managers’ rights and responsibilities
Operating Agreement Amendment conditions
Members’ profit and loss shares
Wisconsin LLC Tax structures
Transfer of ownership rules and procedure
Dissolution of Wisconsin LLC
If your operating agreement explains all the above points, you must follow it for the ownership transfer.
Reasons to Transfer Wisconsin LLC Ownership
There can be many issues that lead to ownership transfer. One of the most common issues is the death of the owner. There can be other issues where transfer of ownership occurs. Here are some issues to consider,
Divorce Or End of Marriage: In some cases, according to the divorce decree, the ownership transfers to the spouse. If the LLC in Wisconsin has an operating agreement and the ownership transfer condition is specified, then the LLC must follow the Wisconsin operating agreement to proceed.
Death of a Member: This is the most common issue in LLCs. In Wisconsin, if a member dies, the ownership, by default, transfers to the legal heirs of the deceased person. However, in this case, the legal heirs (wife/husband/kids) do not get any managerial power or authority. They continue enjoying the benefits, such as a share of the profit and others. But they won’t get any other power in the company. In such situations, other members of the Wisconsin LLC often buy out the deceased’s interests.
Dissolution of Wisconsin LLC: If any member/owner plans to leave the company, the LLC gets dissolved and reformed with the new policy and operating agreement. The members and managers make this sort of decision at the time of the creation of the operating agreement.
FAQs
How do I transfer ownership of my Wisconsin LLC?
In Wisconsin, LLC ownership can be transferred by signing a document that more formally transfers ownership.
Can LLC ownership in Wisconsin be transferred retroactively?
No, Wisconsin LLC ownership cannot be transferred retroactively.
Do I need to notify the state of Wisconsin when transferring LLC ownership?
Yes, the Wisconsin Department of Financial Institutions must be notified of any changes in LLC ownership.
Is there a filing fee for transferring ownership of an LLC in Wisconsin?
Yes, there is a filing fee required when transferring ownership of an LLC in Wisconsin.
Can LLC ownership in Wisconsin be transferred to a non-member?
Yes, LLC ownership in Wisconsin can be transferred to a non-member.
How do I officially transfer ownership of an LLC in Wisconsin?
Ownership of an LLC in Wisconsin can be officially transferred by amending the operating agreement.
Are there any restrictions on transferring ownership of an LLC in Wisconsin?
Restrictions on transferring LLC ownership in Wisconsin can be found in the operating agreement.
Can I transfer partial ownership of my Wisconsin LLC?
Yes, partial ownership of a Wisconsin LLC can be transferred to another party.
What happens to the member’s financial rights in a Wisconsin LLC after ownership transfer?
After ownership transfer in a Wisconsin LLC, the member’s financial rights are typically transferred as well.
Do I need to update the articles of organization when transferring ownership of an LLC in Wisconsin?
In Wisconsin, updating the articles of organization may be necessary when transferring LLC ownership.
Can an LLC operating agreement in Wisconsin prohibit ownership transfer?
Yes, an LLC operating agreement in Wisconsin can prohibit the transfer of ownership.
How long does it take to transfer ownership of an LLC in Wisconsin?
The timeline for transferring ownership of an LLC in Wisconsin varies depending on the complexity of the transfer.
Do I need the consent of other members when transferring ownership of an LLC in Wisconsin?
Typically, the consent of other members is required when transferring LLC ownership in Wisconsin.
Are there tax implications when transferring ownership of an LLC in Wisconsin?
Yes, there may be tax implications to consider when transferring ownership of an LLC in Wisconsin.
Can ownership of a Wisconsin LLC be transferred through a sale or gift?
Yes, ownership of a Wisconsin LLC can be transferred through a sale or gift.
Are there any residency requirements for LLC ownership transfer in Wisconsin?
There are no residency requirements for transferring LLC ownership in Wisconsin.
Can I transfer ownership of my Wisconsin LLC to a family member?
Yes, ownership of a Wisconsin LLC can be transferred to a family member.
Do I need a lawyer to help with transferring ownership of an LLC in Wisconsin?
While not required, it may be beneficial to have a lawyer assist in transferring ownership of an LLC in Wisconsin.
Can I transfer ownership of my Wisconsin LLC without the other member’s consent?
It may be possible to transfer LLC ownership in Wisconsin without the other member’s consent, depending on the operating agreement.
Can ownership of a Wisconsin LLC be transferred to a trust?
Yes, ownership of a Wisconsin LLC can be transferred to a trust.
Can a court order be required for LLC ownership transfer in Wisconsin?
In certain situations, a court order may be required for LLC ownership transfer in Wisconsin.
What happens if there is no operating agreement in place for a Wisconsin LLC when transferring ownership?
Lack of an operating agreement may lead to complications when transferring ownership of a Wisconsin LLC.
Can the transfer of LLC ownership be done electronically in Wisconsin?
Yes, the transfer of ownership of an LLC can be done electronically in Wisconsin.
What information needs to be included in the ownership transfer document for a Wisconsin LLC?
The ownership transfer document in Wisconsin should include details such as the names of the old and new members, the effective date of the transfer, and the percentage of ownership being transferred.
Can ownership of a Wisconsin LLC be transferred after the death of a member?
Yes, ownership of a Wisconsin LLC can be transferred after the death of a member through a will or probate process.
Are there any annual reporting requirements related to ownership transfer of a Wisconsin LLC?
There may be annual reporting requirements related to ownership transfer of a Wisconsin LLC, such as updating the member information with the state department.
Can membership interest in a Wisconsin LLC be transferred separately from management rights?
Yes, membership interest in a Wisconsin LLC can be transferred separately from management rights.
What happens if the operating agreement conflicts with state laws when transferring LLC ownership in Wisconsin?
State laws generally supersede operating agreements when transferring LLC ownership in Wisconsin.
Is there a waiting period required for finalizing ownership transfer of an LLC in Wisconsin?
There is no specific waiting period required for finalizing ownership transfer of an LLC in Wisconsin, but processing times may vary.
Can ownership of a Wisconsin LLC be transferred back to the original member after being transferred once?
Yes, ownership of a Wisconsin LLC can be transferred back to the original member after being transferred once, subject to any restrictions in the operating agreement.
Also Read
In Conclusion
As you all know, forming a limited liability company is much easier than forming a corporation, a partnership, or any other type of business. The ease of transferring ownership from one to another is one of the many reasons for entrepreneurs to start an LLC. In Wisconsin, transferring LLC ownership does not need a lot of paperwork or steps. You must update the formation papers with the new ownership information, file the amendment to the formation document, tell people about it, and comply with the state.
Though it seems easy to file documents while transferring ownership, it could be more complex than just these steps. Based on the local regulations, nature of business, or some other administrative rules, transferring ownership in Wisconsin might take more than what it looks like. It is recommended to consult a professional or attorney before you take such an important business decision.