Reviewing and Creating Operating Agreement
How do I add a partner to my existing business? First, review your operating agreement to see if it outlines the procedure for adding members. If you don’t have an operating agreement, create one before adding members. Define how new members will be added and if existing members need to approve adding them.
Adding a Partner
When adding a member, amend the operating agreement with their name, financial contribution, and share of the company. A single member LLC is taxed differently than a multi-member LLC, so decide if you want taxation as a corporation or partnership.
Adding members requires paperwork but provides more hands, eyes, ears, and brains to maximize potential. They can provide capital, talent, and relationships to grow the business. However, more owners mean more perspectives, which can lead to conflict on decisions. Vet any new members diligently no matter how many you add.
Procedures for Adding and Removing Partners
If you want to add a partner, either sell a portion of your existing shares or issue new shares. Discuss their investment amount. Amend organizing documents to include the new partner and what they are entitled to. To remove your name, dissolve the business if no operating agreement terms allow you to leave or notify authorities of a name change while keeping the business.
Adding Partners Details
Adding members needs unanimous approval on buy-in terms. Amend the operating agreement with their information. Their contribution and share percentage must be defined.
Additional members can provide capital, skills, and customers but will reduce your ownership share. Consider the implications before adding members.
Operational Considerations
Follow operating agreement terms for adding members. If single member, inform the secretary of state when adding a partner to convert to a multi-member LLC. Multi-member LLCs can choose partnership or corporate taxation, unlike single-member LLCs taxed as sole proprietorships.