How to change California LLCs Members

By Michael Banner - Jul 7, 2016     


Isn't it time to get that bum out of office?  
 
No, were not talking about a corrupt California politician, but removing someone who is a member of a California Limited Liability Company.
 
This might sound drastic and perhaps your situation is different: you bought an LLC an you need to change the members; or you sold a percentage to an investor and need to add them to your LLC; or maybe a current member died and you need to remove them or switch with another. 

Regarless of your circumstance, it's actually quite easy to make changes to a California LLC's members. But to do so, you must understand the rules and follow them. Below, I've listed the steps you would follow to change your California LLC's Members.
 

Authority

Before you can make any changes to your LLC, you need to make sure you know who has the authority in your LLC.

You might say, "Wait a minute, this is my LLC and I have the authority!"

This may be true, but what is your title in the LLC? In other words how is your authority defined?

Definitions

Here are a few definitions you should be aware of.


Members are owners of the limited liability company.


Managers are those who have the authority to run the day-to-day operations of the LLC.


Member-Managed LLC is one that is managed by its members (owners) as directed in the articles of organization filed with the California Secretary of State.


Manager-Managed LLC is managed by managers and not the members. 

 

 

Which is mine?

Your articles of organization, which were filed with the state to create your LLC is where you can find this answer. On it your authority is specified under Management in one of the following ways:
 
One Manager - Your LLC is managed by one manager only. That person must sign your reporting document (statement of information)
More Than One Manager - One of your managers must sign the reporting documents.
All Limited Liability Company Member(s) - One of your members must sign all documents as they are the managers of the LLC.
 

Make Changes

When you make changes to your LLC, you do this with your LLC's Operating Agrement. Typically when making changes, like adding a member to the LLC, you would reflect this in a new operating agreement, signed by all the members.

Your operating agreement may also spell out the process for adding or removing members.
 

Report Changes


One the LLC has made it's internal changes, it's official. However, the Secretary of State now requires you to report your changes to them, so that they know who's in charge. 

Reporting the officer change (to the state) Once the formal decision has been made and properly recorded, the Secretary of State requires notification to update their records.  In addition to changes to the corporation’s directors, registered agent, and corporate addresses; the change in the corporation’s officers is reported by filing form
SI-200 C (Statement of Information).
 
This form is specifically made for reporting changes to the corporation.  There is no fee to file the form and it can be done
online.  If you have not filed your annual Statement of Information, you can take care of both duties at one: your annual requirement and the reporting of your changed officer’s.  Simply list the information as it is as the time of the Statement’s filing.

Other Considerations

 

Changing Authority

If you want to change the LLC's authority (ie. from "One Manager" to "All LLC Member(s)"), that is done also internally first and then by filing an amendment with the state.
 

IRS

If you changed the authorized person listed on the EIN application, you'll need to notify them of the change as well. See EIN changes for more details on this.
 
 

Banking

If the member was also a signor on the company's checking account, you'll want to change this as well. Bring in the old and new operating agreement (or any other related paperwork) and show them this.
 

About Michael Banner
  CEO & Founder of SmallBiZ.com, created over seventeen years ago to help small business owners simplify the process of starting & managing their small businesses. SmallBiZ.com now serves over 10,000 businesses per year with various filing and subscription services; in addition to the 1000's of daily visitors to www.smallbiz.com, accessing free services, help pages, & educational videos & webinars.


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