How to Transfer LLC Ownership in Ohio: A Step-by-Step Guide

Transferring ownership of a Limited Liability Company (LLC) in Ohio, whether bringing on a partner or executing a sale, is a significant step. For American entrepreneurs, expats and international founders, navigating this process correctly is vital for a smooth transition while maintaining the company's legal standing.

The process involves specific legal steps, documentation, and a clear understanding of state requirements. This guide covers how to transfer LLC ownership in Ohio, focusing on the Operating Agreement, the types of transfers, a step-by-step process, and key legal and tax considerations.

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Table of contents
Understanding LLC Ownership in Ohio The Role of the Ohio Operating Agreement Types of LLC Ownership Transfers in Ohio How to Transfer LLC Ownership in Ohio: A Step-by-Step Guide Legal and Tax Considerations Frequently Asked Questions (FAQ)

Understanding LLC Ownership in Ohio

An LLC combines the liability protection of a corporation with the flexibility of a partnership. Its owners are "members," and their ownership is a "membership interest." Unlike corporate stock, transferring membership interest in an Ohio LLC typically requires the consent of the other members.¹ This structure gives members control over who they are in business with.

LLCs in Ohio offer great flexibility, allowing members to be individuals, other corporations, or even foreign entities, making them a popular choice for international businesses looking to establish a presence in the U.S.²

With the "who" of ownership established, the "how" becomes paramount. How will you make decisions, distribute profits, or handle a member's departure? This is governed by a single document, underscoring the critical role of the Ohio Operating Agreement.

The Role of the Ohio Operating Agreement

While not legally required in Ohio, operating an LLC without an Operating Agreement (OA) is a significant risk. An OA is an internal document that functions as the company's rulebook, defining member rights, management structure, and, crucially, the procedures for transferring ownership.

A well-drafted OA includes a "buy-sell agreement" that specifies the process for when a member leaves. Without an OA, ownership transfers are governed by default Ohio state law, which generally requires unanimous consent from all members, potentially complicating the process.¹

Because circumstances inevitably change, members may retire, pass away or simply wish to exit the business, the operating agreement provides the essential framework for these transitions. Let's explore the common types of LLC ownership transfers in Ohio.

Types of LLC Ownership Transfers in Ohio

Ownership transfers fall into three main categories, each with distinct procedures.

Partial Transfer: The Buyout Process

This occurs when a member leaves and their interest is acquired by the remaining members or a new member. This buyout process is typically governed by the buy-sell provisions in the OA. Following the transfer, the OA must be amended to reflect the new ownership structure.

Full Transfer: Selling the Entire LLC

A full transfer involves selling the entire business to another party. If your OA details this process, you must follow those steps. If not, Ohio law requires the consent of all members to sell the LLC's assets or the entire entity.¹ A comprehensive OA streamlines this complex transaction.

Involuntary Transfers: Death of a Member

The death of a member is an involuntary transfer. In Ohio, a deceased member's economic interest (the right to profits) passes to their heirs, but management rights do not.¹ Your OA can create a clearer path forward, often giving remaining members the option to buy the interest from the heirs, ensuring business continuity.

Understanding these different scenarios is the first step. The next step is to execute the transfer correctly to ensure it is legally binding and properly documented. Here's how to transfer LLC ownership in Ohio.

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How to Transfer LLC Ownership in Ohio: A Step-by-Step Guide

Transferring ownership requires a formal process to ensure it is legally binding and protects the company.

Step 1: Review Your Operating Agreement

Your OA is the primary guide and dictates the rules and voting requirements you must follow.

Step 2: Obtain Member Approval

Hold a formal vote to approve the transfer as outlined in your OA. Without an OA, you will need unanimous written consent from all members.¹ Document this approval in meeting minutes.

Step 3: Draft a Purchase and Sale Agreement

For any sale, a formal Purchase and Sale Agreement is essential. This legal contract details the terms of the transfer, including price and payment schedule.

Step 4: Amend the Operating Agreement

After approval, amend the OA to reflect the changes. The amendment should list the new owner, their contribution, and ownership percentage. All members must sign the amended OA.

Step 5: File an Amendment with the Ohio Secretary of State

If your Articles of Organization list members, you must file a Certificate of Amendment. Use the official Ohio LLC amendment form and submit it to the Ohio Secretary of State LLC Filing Office with the $50 fee.^3,4

Step 6: Notify Relevant Parties

Inform your bank, the IRS, clients, vendors and licensing agencies of the ownership change.

Following these steps ensures the ownership change is executed correctly, but the process doesn't end with the paperwork. It's equally important to manage the financial and regulatory aftermath to avoid future complications. This brings us to the key legal and tax considerations.

Legal and Tax Considerations

Properly managing legal and tax details is essential to avoid future complications.

Tax Implications

An ownership change has significant tax consequences. Always consult with a tax professional.

Employer Identification Number (EIN): If your business was a single-member LLC, you need a new EIN from the IRS when you add a member.⁵

Tax Classification: The transfer is an opportunity to review your LLC's tax classification (e.g., S Corp status) with a professional.

Legal Compliance

Strictly following the procedures in your OA and Ohio law is crucial for maintaining your LLC's liability shield. Failing to document the transfer properly could expose members to personal liability for business debts.

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Frequently Asked Questions (FAQ)

Can you transfer an LLC to another person in Ohio?

Yes. The process requires following the procedures outlined in your Operating Agreement. If you don’t have one, you must obtain unanimous member consent as required by Ohio state law before proceeding with the transfer.¹

How much does it cost to transfer an LLC in Ohio?

The direct state filing fee for a Certificate of Amendment is $50.⁴ However, total costs will be higher when you include fees for legal and accounting professionals to help draft agreements and provide essential tax advice.

How do I transfer my LLC to someone else?

To transfer your LLC, you must follow the process in your Operating Agreement, get member approval, execute a formal sale agreement, amend the OA, and file the necessary updates with the Ohio Secretary of State and the IRS.

How to add a member to an LLC in Ohio?

Adding a member involves reviewing your OA for the proper procedure, getting approval from existing members, agreeing on the new member’s capital contribution and ownership stake, and amending the OA. You may also need to file a state amendment and apply for a new EIN.⁵

What happens if an LLC member dies in Ohio?

A deceased member's economic interest (their share of profits) passes to their heirs, but their management rights do not transfer automatically.¹ A comprehensive Operating Agreement should include a buyout clause to address this scenario.

Do I need a new EIN after transferring LLC ownership?

A new Employer Identification Number (EIN) is typically required when a single-member LLC adds owners and becomes a multi-member LLC. A simple change of members in an existing multi-member LLC usually does not require a new EIN.⁵

Can I change the LLC name in Ohio during an ownership transfer?

Yes, you can change your LLC's name by filing a Certificate of Amendment with the Ohio Secretary of State and paying the $50 filing fee.⁴ This can be done on the same form used to update member information.

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Sources:

1. How to Transfer LLC Ownership in Ohio | ZenBusiness
2. How to Transfer Ohio LLC Ownership | LLCBuddy.
3. Navigating the Process of LLC Ownership Transfer in Ohio | LLCPedia
4. Business Filings Forms & Fee Schedule | Ohio Secretary of State
5. Do You Need a New EIN? | Internal Revenue Service