Adding a Member to a Single-Member LLC
Adding a member to an LLC is straightforward, but there are slightly different considerations when you add a new member to a single-member LLC. You will not need to re-register your LLC with the state, but you may have to file an amended Articles of Organization.
Though not required, you should also amend your Operating Agreement to clarify the relationship you have with your new partner. Due to the flexibility of the LLC structure, your new partner may invest any amount of time or money into the LLC and receive any share of the LLC you two deem agreeable.
New LLC Member Checklist
- Amend your Operating Agreement (this likely does not require an additional filing with the state) to govern the relationship between you and your new member.
- Add the new member’s name to your annual filing with the Secretary of State if required by your state.
- File Form 8832 with the IRS to change your taxation status from “disregarded entity” to “partnership”. This will not affect your personal taxation as your LLC will still be a pass-through entity.
- Begin filing Form 1065 with the IRS to record LLC profits and losses. This is an informational return only and no tax will be due. Each member will still claim profits and losses on their own tax returns.
- Begin claiming only your share of the profits and losses on your personal income tax return. For instance, if you now own a 50% share of the LLC, claim only 50% of the LLC’s profits and losses on your return and let your partner claim the other 50%.
There is little you must do when you add a partner to your single-member LLC, but you should be aware of all the implications. If you are unsure about how a new member will affect your LLC, speak with an attorney.