Inside every Corporation and LLC with more than one owner, there comes a moment when ownership changes hands. A founder leaves. A partner buys out another. An investor takes a position. A family member is added. An estate is settled.
The transaction itself is private. The records of it are what survive the transaction, and the records have to be drafted carefully because they are what every future buyer, lender, and tax authority will read to understand who actually owns what.
Below is the framework we use to draft and execute a clean share transfer for a US Corporation or membership interest transfer for a US LLC.
Stock vs. membership interests.
A Corporation issues stock, in the form of share certificates. The shares are units of ownership; transferring them moves ownership cleanly from one party to another. The transfer is recorded on the back of the certificate (or by a book-entry system) and entered in the stock transfer ledger.
An LLC does not issue stock. Ownership is expressed as membership interests, often as percentages set in the Operating Agreement. Transferring membership requires more than signing a certificate: it usually requires amending the Operating Agreement to reflect the new percentages and the new member if applicable.
The mechanics differ, the legal substance does not. Both produce a binding record that someone has bought and someone has sold a piece of the company.
What the operating agreement controls.
The sale of shares is a private transaction with public consequences. The signed document is what protects both parties when the consequences arrive.
Before the transfer can happen, the company's governing document, the Operating Agreement for an LLC or the Bylaws plus shareholder agreement for a Corporation, has to permit it. Many of these agreements include restrictions on transfers:
- Right of first refusal: existing members can match any third-party offer before the seller can transfer to an outsider
- Approval requirement: a vote of the existing members or board is required before a transfer is valid
- Restricted classes of buyers: some agreements only allow transfers within the family, or only to other members, or only to accredited investors
- Tag-along and drag-along rights: minority members may have rights to join a sale, or majority members may have rights to force minority sales
We read the governing document first. If a restriction blocks the proposed transfer, we identify it before drafting, so you can either get the necessary consents or restructure the deal.
What we draft and deliver.
The full transfer package depends on the entity type and the structure of the deal, but the core documents are consistent across most transfers.
- 01Resolution of the company's members or board approving the transfer
- 02Transfer agreement signed by buyer and seller, setting price, payment terms, and warranties
- 03Updated stock transfer ledger or membership ledger reflecting the new ownership
- 04New share certificate (Corporation) or amended Operating Agreement (LLC)
- 05Updated capitalization table for the company's records
- 06Notice to the state on the next annual report, if the new owner triggers a reporting threshold
Why the document matters more than the price.
The price the parties agreed to is settled the moment the money moves. The document is what stays. If the buyer later wants to sell, the next buyer reads the transfer document. If the company is acquired, the acquirer's lawyers read every transfer document in the company's history. If a tax authority audits, the same.
A clean transfer document, signed by the right parties, with the right consents, recorded in the right ledger, is invisible: nothing breaks because of it. A messy one creates friction every time it is read, and the friction compounds. We draft for the long view.
Business days from intake to ready-for-signature transfer
When to bring us in.
Before the price is finalized. The structure of the deal (cash, installment, equity-for-equity, redemption by the company) has consequences for both parties' tax bills and for the company's capital structure. Once the parties have committed to a structure, options narrow.
We are not a substitute for a lawyer or an accountant on a complex deal. For small founder-to-founder transfers and routine cap table adjustments, we are the right level of formality. For larger transactions or contested transfers, we work alongside your counsel.