The process can differ depending on whether you’re selling the entire LLC or just changing who’s in charge. You need to figure out whether you’re doing a full or partial transfer of ownership.
If you’re doing a partial transfer, you’ll need to decide how much of the LLC you’re selling. Transferring a partial interest in an LLC applies when you are not selling the entire business and you do not own the entire LLC outright.
You can also transfer the entire ownership of your LLC by selling it to a third party. This is typically a more complicated process that should be completed with an attorney. The basic steps include:
- review your company documents
- evaluate your business’s assets
- make a sales agreement with the buyer
Tax Implications and IRS Notifications
If the change in ownership changes the tax status of the LLC you’ll file form 8832 with the IRS. If the change of ownership will change the responsible party of the LLC’s EIN, you’ll file form 8832-B. However, you cannot transfer an EIN to a new owner.
To close your account with the IRS, send a letter and explain the reason you want to close your tax account. An EIN belongs permanently to a business entity and is never reused or reassigned. If a business never starts up, the IRS can close its account but retain the EIN for future use.
Updating Information and Changing Entity Type
Some ownership change triggers for updating beneficial ownership information reports include buyouts, new responsible parties, and changes to the type or percentage of interest held.
If just one piece of information needs updating, like legal business name, the full report does not need to be completed again.
To change from sole proprietorship to LLC, inform the IRS by completing form 8832 to notify them of the new tax classification. Submit form 8832 with a tax return copy so the IRS has the applicable details to grant or deny the status change request.