Q: I am considering changing my LLC from a multiple member (2 people) to single-member LLC. Is this is possible, rather than totally starting over?
Thank you to a customer from Utah for the excellent question! It is definitely possible to change an LLC from multi-member to a single-member LLC. Many LLCs will change their membership configuration over the course of the company’s life. In Utah, when you remove a member from an LLC, you must submit an LLC Registration Information Change Form. Here’s what you need to know about removing an LLC member in the Beehive State:
Submit a UT Registration Information Change form
When you remove a member from a Utah LLC, you must submit an LLC Registration Information Change form ($13) with the Utah Division of Corporations. You can file this form online, by mail, or by fax.
Online: Utah Business Renewal portal
By Mail:
Utah Division of Corporations & Commercial Code
PO Box 146705
Salt Lake City, UT 84114-6705
By Fax: (801) 530-6438.
Can I file a UT LLC amendment instead?
No. You can only use a Utah LLC Amendment to change your business name, business purpose, management structure, or period of duration. To remove an LLC member, you must use the Registration Information Change Form.
Update Your Utah LLC Operating Agreement
Next, you need to update your Utah LLC Operating Agreement.
Ultimately, if a member resigns or is removed from your LLC for any reason, your LLC operating agreement must reflect the change. Any changes to your operating agreement require the unanimous consent of members—unless some other procedure is detailed in the operating agreement itself (see Utah Code § 48-3a-112).
Can I involuntarily remove a member from my Utah LLC?
Per Utah Code § 48-3a-602, a Utah LLC may remove a member for many reasons, including, among others:
- Terms defined in your operating agreement
- As the result of a merger
- By unanimous consent of all members
- By judicial order
- As designated by the people to last hold the membership interest of the LLC’s last remaining member (within 90 days of their dissociation)
How should an ex-member’s interest be distributed?
Terms for distributing the interest of an outgoing member of the LLC should be set out in the operating agreement. This should determine whether or not the outgoing member must be bought out, who can purchase the departing member’s share, the price for a outgoing member’s interest in the LLC, and if any other events can force a buyout.
File Form 8832 with the IRS
If removing an LLC member changes your tax status, you’ll need to inform the IRS by filing Form 8832. Your tax classification will change if removing a member changes your multi-member LLC into a single-member LLC. By default, a single-member LLC is taxed as a sole proprietorship (aka “disregarded entity”) whereas a multi-member LLC is taxed as a partnership.