Adding a member
- Check the operating agreement for how new members are admitted, usually a vote of the current members.
- Agree the terms: what the new member contributes (money, property or work), the ownership share they get, and any vesting.
- Sign the paperwork: a written consent admitting the member, and the new member signing on to the operating agreement.
- Amend the operating agreement with the new ownership table, profit shares and voting. See how to amend an operating agreement.
- Update the state and the bank if they hold member or manager details (below).
Removing a member
- Read the exit terms in the operating agreement: withdrawal, buyout price or formula, and payment timing.
- Agree the price for their share and who buys it: the LLC (a redemption) or the remaining members.
- Sign an assignment or redemption agreement that transfers the interest and releases claims both ways.
- Amend the operating agreement and update the state record, the bank signers and the IRS responsible party if that person is leaving.
The tax change
By default, a single-member LLC is taxed as a sole proprietorship (a disregarded entity) and an LLC with two or more members as a partnership. So going from one member to two changes the return: the LLC starts filing Form 1065 and issuing K-1s. Going from two to one reverses it. An LLC that elected to be taxed as an S or C corporation keeps that treatment, though an S corporation has its own limits on who can own shares.
Whether the LLC needs a new EIN depends on the change. The IRS sets out each case on its Do you need a new EIN? page.
Updating the state
Some states list members or managers on the formation document or the yearly report; others do not show owners at all. If yours does, file an amendment or update the details in your next report. Each state hub page names the office and the report:
Find your state, or see the compliance tracker for your next filing.
Related: dissolving an LLC, moving an LLC to another state.
Frequently asked questions
How do I add a member to an LLC?
Follow the admission rules in your operating agreement (usually a vote of the existing members), agree what the new member contributes and receives, amend the operating agreement to show the new ownership, and update the state record if your state lists members or managers.
How do I remove a member from an LLC?
Follow the withdrawal or buyout terms in the operating agreement. Agree the price for their share, sign an assignment or redemption agreement, amend the operating agreement, and update the state record if needed.
What if the operating agreement does not cover it?
Then your state’s LLC law decides, and many states require every member to agree before a new member is admitted. If you have no written agreement, write one now with the current owners.
Does adding a member change how the LLC is taxed?
Yes, if it goes from one member to two. A single-member LLC is taxed as a sole proprietorship by default; with two or more members it is taxed as a partnership by default and files Form 1065, unless it has elected corporate tax treatment.
Do I need a new EIN when members change?
Sometimes. It depends on the change in ownership and tax classification. The IRS page "Do you need a new EIN?" sets out each case; check it before filing your next return.
Can a member be forced out?
Only if the operating agreement allows expulsion or the state’s law does in the circumstances. Without a clause, a buyout has to be negotiated.
