How is the change in membership documented?
Typically, the names of LLC members are not filed with the State of Delaware, therefore there is no amendment that needs to be filed with the Delaware Division of Corporations or your Registered Agent to add or remove members from a Delaware LLC. The names of the members are contained in the company’s LLC Operating Agreement, so that is where the change should be documented.
Who do you need to notify of the change?
Since the Delaware LLC is a “contractual entity,” the members of the LLC derive their ownership interest from the LLC Operating Agreement they enter into with each other. Most LLC agreements provide that all members must consent to the transfer of another member’s ownership interest in order for the new member to be a voting member. Therefore it is important when adding a member to have all the members sign-off on the new agreement. The first new agreement is typically called the “First Amended and Restated LLC Operating Agreement”, since it was both changed and restated in its entirety to replace the previous agreement.
The same holds true when removing a member. It is important to have the resigning member acknowledge the terms whereby that member is leaving the LLC, such as consideration and to whom the interest is being transferred. After the member signs the resignation and transfer acknowledgment, the remaining members sign a First Amended and Restated LLC Operating Agreement. Subsequent transfers would be listed in order, for example the next change would be contained in a “Second Amended and Restated LLC Operating Agreement” and so on.
Please email email@example.com to request a quote for our assistance preparing these documents, which costs less than a new formation package.