How to Change ownership percentage in an LLC

Joe S.Pro Member

Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes

My oldest son recently opened an LLC in order to start investing. He hasn't done any business with the LLC as of yet. He is wanting me to help him with his business and give me a percentage of his business now after the fact that he's opened it. Of course, I originally told him that I could help coach him and it would be his business 💯%, but he feels better if I own a portion of it and would be a little more active with helping him getting it up and running…
Would it be simpler just to open a new LLC and close down the first one? He hasn’t even opened up a checking account yet.

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Natalie KolodijBusiness Member

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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes

Quote from @Ben Fernandez:

@Natalie Kolodij Thanks. I'm aware of the state and federal applications. But I appreciate you explaining them.

So, are you assuming his son never set up an EIN, as to why you're saying a new EIN isn't necessary?

If so I can see your point, being that this would be the initial filing.

However, I still want to confirm your statement about whether you think a new EIN is required if the EIN was already set up as single member and is now being altered to multi member.

No- even if the son has an LLC with an EIN he does not need a new one.

If travel regulations say you need a passport to fly to Spain.

But previously you'd flown to Japan. It doesn't mean you need a new passport to go to Spain.

You've already done something which caused you to obtain the thing needed to go to Spain.

If you need an EIN to file a LLC on form 1065; and you already have an LLC with an EIN; you've met the requirement.

Any LLC with an EIN retains that EIN if its classification changes under the entity classification regulations. Treas. Reg. §301.6109-1(h)(1).

If an LLC treated as a disregarded entity is later recognized as a separate entity for federal tax purposes and it has an existing EIN, it continues to use that EIN. If the LLC does not have an EIN, it must acquire an EIN and not use the owner's TIN. See Treas. Reg. §301.6109-1(h)(2)(ii).

Here's that Code Section:

"(ii) When an entity that was disregarded as an entity separate from its owner becomes recognized as a separate entity. If a single owner entity's classification changes so that it is recognized as a separate entity for federal tax purposes, and that entity had an EIN, then the entity must use that EIN and not the TIN of the single owner. If the entity did not already have its own EIN, then the entity must acquire an EIN and not use the TIN of the single owner."

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y
Quote from @Joe S.:

My oldest son recently opened an LLC in order to start investing. He hasn't done any business with the LLC as of yet. He is wanting me to help him with his business and give me a percentage of his business now after the fact that he's opened it. Of course, I originally told him that I could help coach him and it would be his business 💯%, but he feels better if I own a portion of it and would be a little more active with helping him getting it up and running…
Would it be simpler just to open a new LLC and close down the first one? He hasn’t even opened up a checking account yet.

It is very simple - you should have an operating agreement in the LLC and you can amend it, if it has been shared in the past then you would do an amendment signed by him noting your percentage. If you do not have one then you can have one created that shows ownership perentages and you both sign it. Not legal advice and always should consult an attorney
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Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
1y
Chris is correct, amended and restated operating agreement is all that's needed. Also, if your son requires your signature to co-guarantee loans on his first purchases, the lender would most likely want you to be a member of the LLC as well.
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Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
1y
I wouldn’t do it.
1. At some point he will want to or should want it just to be him. He should want to keep the same LLC so he has the history behind it.
2. If he goes to either dissolve the LLC or buy you out it could create some cash issues for him.
3. If you're not really good at writing the LLC operating agreement you could get sucked into a bad situation.
4. To me it is better for him to do a consulting agreement with you. If he wants you to share. Taxes will be higher for you but less risk.
If you move forward with the LLC then reduce exposure. Build these into the Operating agreement.
A. How to value and you sell out.
B. Loans and bank accounts require dual approval to add and for transactions.
C. Credit card and account limits are small enough to trigger early payment.

D. Would do term insurance on both of you for 5 years. The other is the beneficiary or the LLC.
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- Joe S.Pro Member
  OP
  Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
  1y
  Quote from @Henry Clark:
  
  I wouldn’t do it.
  1. At some point he will want to or should want it just to be him. He should want to keep the same LLC so he has the history behind it.
  2. If he goes to either dissolve the LLC or buy you out it could create some cash issues for him.
  3. If you're not really good at writing the LLC operating agreement you could get sucked into a bad situation.
  4. To me it is better for him to do a consulting agreement with you. If he wants you to share. Taxes will be higher for you but less risk.
  If you move forward with the LLC then reduce exposure. Build these into the Operating agreement.
  A. How to value and you sell out.
  B. Loans and bank accounts require dual approval to add and for transactions.
  C. Credit card and account limits are small enough to trigger early payment.
  
  D. Would do term insurance on both of you for 5 years. The other is the beneficiary or the LLC.
  
  Can you elaborate on point C more?
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- Michael PlaksPro Member
  Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
  1y
  Quote from @Henry Clark:
  
  I wouldn’t do it.
  1. At some point he will want to or should want it just to be him. He should want to keep the same LLC so he has the history behind it.
  4. To me it is better for him to do a consulting agreement with you. If he wants you to share. Taxes will be higher for you but less risk.
  
  Thumbs up to Henry. Very rarely does someone bring common sense into these discussions.
  But I agree 100%. Partnerships, and particularly inter-family partnerships sound like a great and simple idea. At first. Then life happens, and you have a very tense Thanksgiving table.
  I would also recommend consulting over partnering.
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Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
1y
Point C. Set your limits at say $5,000 versus $20,000. That way nothing gets out of hand and you both know what is going on since it takes two of you to pay. You might have to pay them down 2 or 3 times a month which is a headache, but controls your spending better.
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Stephen Nelson
Accountant , CPA, MBA in Finance, MS in Taxation · Redmond, WA · Member since 2025 · 172 posts · 135 votes
1y
I don't see this point listed above, but if LLC goes from being a single member LLC to a multiple member LLC, you'll go from having a disregarded entity to a partnership.
That greatly complicates the tax return. A disregarded entity just has its income and deductions reported on Schedule E inside the member's 1040.
A partnership return requires for all practical purposes a real accounting system that generates financial statements and a competent tax accountant.
Note: Not 100% sure this is right, but I think Intuit (which I consider the Costco or Walmart of entity tax return prep) seems to charge $1700-ish for a basic 1065?
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Mitchell Zoll
Attorney · Austin, TX · Member since 2018 · 112 posts · 78 votes
1y
Please talk with a lawyer about setting this up correctly, whether you use his existing LLC or create a new one. There are a bunch of issues that you need to address now with your Company Agreement - even MORE so because you are family - Not less.
As for how to do it if you are going to use his LLC. Think of it like he owns 100 out of 100 "shares" of Dell stock. You want to now own 10 "shares" and he owns 90. How do those shares get to you? What paperwork do you show the IRS or bank or other members in the future to show who owns what, and when that ownership started?
It's the same for his company. Membership Interest (LLC) = stock (Corp). His LLC = Dell. It's not different because you are family. It's not different because he hasn't done much with it (although the price of the interests you get will be near zero!)
Amending the Company Agreement is part of the process because it documents who owns what inside the company. But that's the end of the process.
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Ben FernandezBusiness Member
Realtor · Lancaster, PA · Member since 2025 · 169 posts · 97 votes
1y
You all can amend or apply for a new FEIN being that your son would be going from a single member LLC to a multi member LLC. I think the new FEIN will be needed. State docs need amended as well. You'd also update or create an operating agreement to specify the ownership percentages and roles of the LLC.

Another process would be to leave his LLC as is, create a new LLC for yourself, and then create a joint venture LLC where his LLC and your LLC are the members. You would also establish an operating agreement for this JV LLC to indicate the roles, responsibilities and ownership percentages.
[email protected]717-945-7040
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- Stephen Nelson
  Accountant , CPA, MBA in Finance, MS in Taxation · Redmond, WA · Member since 2025 · 172 posts · 135 votes
  1y
  Quote from @Ben Fernandez:
  
  You all can amend or apply for a new FEIN being that your son would be going from a single member LLC to a multi member LLC. I think the new FEIN will be needed. State docs need amended as well. You'd also update or create an operating agreement to specify the ownership percentages and roles of the LLC.
  
  Another process would be to leave his LLC as is, create a new LLC for yourself, and then create a joint venture LLC where his LLC and your LLC are the members. You would also establish an operating agreement for this JV LLC to indicate the roles, responsibilities and ownership percentages.
  
  If son got an EIN for an LLC, I think that would still work when or if the LLC goes from single member to multiple member as it does if the LLC goes from disregarded entity to S corporation. (Not saying he should elect S status... only using that as an example of how LLC EINs reflect their tax classification flexibility in many cases.)
  1 Reply
- Ben FernandezBusiness Member
  Realtor · Lancaster, PA · Member since 2025 · 169 posts · 97 votes
  1y
  Quote from @Stephen Nelson:
  
  Quote from @Ben Fernandez:
  
  You all can amend or apply for a new FEIN being that your son would be going from a single member LLC to a multi member LLC. I think the new FEIN will be needed. State docs need amended as well. You'd also update or create an operating agreement to specify the ownership percentages and roles of the LLC.
  
  Another process would be to leave his LLC as is, create a new LLC for yourself, and then create a joint venture LLC where his LLC and your LLC are the members. You would also establish an operating agreement for this JV LLC to indicate the roles, responsibilities and ownership percentages.
  
  If son got an EIN for an LLC, I think that would still work when or if the LLC goes from single member to multiple member as it does if the LLC goes from disregarded entity to S corporation. (Not saying he should elect S status... only using that as an example of how LLC EINs reflect their tax classification flexibility in many cases.)
  
  LLCs with taxing status changes to C or S corp, as well as those that change the members, require a new EIN.
  [email protected]717-945-7040
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Natalie KolodijBusiness Member
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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
1y
This also hasn't come up -

Are they your dependent/a minor?

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- Joe S.Pro Member
  OP
  Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
  1y
  Quote from @Natalie Kolodij:
  
  This also hasn't come up -
  
  Are they your dependent/a minor?
  
  Not a minor…. 20yr
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Ben FernandezBusiness Member
Realtor · Lancaster, PA · Member since 2025 · 169 posts · 97 votes
1y
LLC's with taxing status changes to C or S corp, as well as those that change the members, require a new EIN.
[email protected]717-945-7040
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- Stephen Nelson
  Accountant , CPA, MBA in Finance, MS in Taxation · Redmond, WA · Member since 2025 · 172 posts · 135 votes
  1y
  Quote from @Ben Fernandez:
  
  LLC's with taxing status changes to C or S corp, as well as those that change the members, require a new EIN.
  
  If you get an EIN for an LLC and you do it right, the IRS knows the LLC is an entity that can be treated as an S corporation. (That the LLC is what the treasury regulations label an "eligible entity" is embedded in the EIN information.) Thus, you do not need a new EIN when an LLC makes an S election.
  
  My CPA firm does dozens of these elections every year for LLCs. And has for decades.
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- Ben FernandezBusiness Member
  Realtor · Lancaster, PA · Member since 2025 · 169 posts · 97 votes
  1y
  Quote from @Stephen Nelson:
  
  Quote from @Ben Fernandez:
  
  LLC's with taxing status changes to C or S corp, as well as those that change the members, require a new EIN.
  
  If you get an EIN for an LLC and you do it right, the IRS knows the LLC is an entity that can be treated as an S corporation. (That the LLC is what the treasury regulations label an "eligible entity" is embedded in the EIN information.) Thus, you do not need a new EIN when an LLC makes an S election.
  My CPA firm does dozens of these elections every year. And has for decades.
  
  That's correct. It's only needed for new LLCs. Not existing ones who want to change their tax election. For membership changes, a new LLC is needed.
  [email protected]717-945-7040
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- Natalie KolodijBusiness Member
  Moderator
  Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
  1y
  Quote from @Ben Fernandez:
  
  Quote from @Stephen Nelson:
  
  Quote from @Ben Fernandez:
  
  LLC's with taxing status changes to C or S corp, as well as those that change the members, require a new EIN.
  
  If you get an EIN for an LLC and you do it right, the IRS knows the LLC is an entity that can be treated as an S corporation. (That the LLC is what the treasury regulations label an "eligible entity" is embedded in the EIN information.) Thus, you do not need a new EIN when an LLC makes an S election.
  My CPA firm does dozens of these elections every year. And has for decades.
  
  That's correct. It's only needed for new LLCs. Not existing ones who want to change their tax election. For membership changes, a new LLC is needed.
  
  Membership changes do not require a new LLC or a new EIN.
  
  LLCs add and remove members all the time; there is no requirement to start a new one if that's what you're doing.
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- Ben FernandezBusiness Member
  Realtor · Lancaster, PA · Member since 2025 · 169 posts · 97 votes
  1y
  @Natalie Kolodij Thanks for chiming in. Do you mind describing how this is acceptable?
  
  It's very misleading if the IRS website specifically states when a new EIN is required, but isn't.
  [email protected]717-945-7040
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- Natalie KolodijBusiness Member
  Moderator
  Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
  1y
  Quote from @Ben Fernandez:
  
  @Natalie Kolodij Thanks for chiming in. Do you mind describing how this is acceptable?
  
  It's very misleading if the IRS website specifically states when a new EIN is required, but isn't.
  
  I think below is what you're looking at-
  
  For an LLC you need a new EIN if you create a NEW (from day 1 of setup to file taxes you need an EIN in these situations)
  
  - LLC that's going to be a Corp
  -LLC that needs an EIN for payroll even if SMLLC
  -LLC with multiple members
  
  Making a brand new one of any of those LLC's requires a new EIN specific to that new LLC.
  
  Changing from single member to multi once an established LLC, or changing from being taxed as disregarded to taxed as S Corp don't require a new EIN. It's the same LLC. You're just changing your tax status.
  
  An LLC isn't really tangible to the IRS. It's a state established creation.
  
  So the IRS is just saying for filing purposes, you need an EIN for these situations : (Lists the versions of LLC's that need an EIN from day one to file for tax purposes).
  A single member LLC doesn't NEED an EIN from day one for tax filing purposes (if it's just a disregarded SMLLC with no payroll) BUT it can choose to have an EIN. It's optional.
  So if your tax status changes from the "doesn't need an EIN" category to the "needs an EIN" category...and you already have an EIN. You're fine. You have the thing the IRS requires to file the taxes.
  "When to get a new EIN"
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- Ben FernandezBusiness Member
  Realtor · Lancaster, PA · Member since 2025 · 169 posts · 97 votes
  1y
  @Natalie Kolodij Thanks. I'm aware of the state and federal applications. But I appreciate you explaining them.
  
  So, are you assuming his son never set up an EIN, as to why you're saying a new EIN isn't necessary?
  
  If so I can see your point, being that this would be the initial filing.
  
  However, I still want to confirm your statement about whether you think a new EIN is required if the EIN was already set up as single member and is now being altered to multi member.
  [email protected]717-945-7040
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- Natalie KolodijBusiness Member
  Moderator
  Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
  1y
  Quote from @Ben Fernandez:
  
  @Natalie Kolodij Thanks. I'm aware of the state and federal applications. But I appreciate you explaining them.
  
  So, are you assuming his son never set up an EIN, as to why you're saying a new EIN isn't necessary?
  
  If so I can see your point, being that this would be the initial filing.
  
  However, I still want to confirm your statement about whether you think a new EIN is required if the EIN was already set up as single member and is now being altered to multi member.
  
  No- even if the son has an LLC with an EIN he does not need a new one.
  
  If travel regulations say you need a passport to fly to Spain.
  
  But previously you'd flown to Japan. It doesn't mean you need a new passport to go to Spain.
  
  You've already done something which caused you to obtain the thing needed to go to Spain.
  
  If you need an EIN to file a LLC on form 1065; and you already have an LLC with an EIN; you've met the requirement.
  
  Any LLC with an EIN retains that EIN if its classification changes under the entity classification regulations. Treas. Reg. §301.6109-1(h)(1).
  
  If an LLC treated as a disregarded entity is later recognized as a separate entity for federal tax purposes and it has an existing EIN, it continues to use that EIN. If the LLC does not have an EIN, it must acquire an EIN and not use the owner's TIN. See Treas. Reg. §301.6109-1(h)(2)(ii).
  
  Here's that Code Section:
  
  "(ii) When an entity that was disregarded as an entity separate from its owner becomes recognized as a separate entity. If a single owner entity's classification changes so that it is recognized as a separate entity for federal tax purposes, and that entity had an EIN, then the entity must use that EIN and not the TIN of the single owner. If the entity did not already have its own EIN, then the entity must acquire an EIN and not use the TIN of the single owner."
  
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  Kolodij Tax & Consulting
  Website View Page
  3 Reply
- Ben FernandezBusiness Member
  Realtor · Lancaster, PA · Member since 2025 · 169 posts · 97 votes
  1y
  Quote from @Natalie Kolodij:
  
  Quote from @Ben Fernandez:
  
  @Natalie Kolodij Thanks. I'm aware of the state and federal applications. But I appreciate you explaining them.
  
  So, are you assuming his son never set up an EIN, as to why you're saying a new EIN isn't necessary?
  
  If so I can see your point, being that this would be the initial filing.
  
  However, I still want to confirm your statement about whether you think a new EIN is required if the EIN was already set up as single member and is now being altered to multi member.
  
  No- even if the son has an LLC with an EIN he does not need a new one.
  
  If travel regulations say you need a passport to fly to Spain.
  
  But previously you'd flown to Japan. It doesn't mean you need a new passport to go to Spain.
  
  You've already done something which caused you to obtain the thing needed to go to Spain.
  
  If you need an EIN to file a LLC on form 1065; and you already have an LLC with an EIN; you've met the requirement.
  
  Any LLC with an EIN retains that EIN if its classification changes under the entity classification regulations. Treas. Reg. §301.6109-1(h)(1).
  
  If an LLC treated as a disregarded entity is later recognized as a separate entity for federal tax purposes and it has an existing EIN, it continues to use that EIN. If the LLC does not have an EIN, it must acquire an EIN and not use the owner's TIN. See Treas. Reg. §301.6109-1(h)(2)(ii).
  
  Here's that Code Section:
  
  "(ii) When an entity that was disregarded as an entity separate from its owner becomes recognized as a separate entity. If a single owner entity's classification changes so that it is recognized as a separate entity for federal tax purposes, and that entity had an EIN, then the entity must use that EIN and not the TIN of the single owner. If the entity did not already have its own EIN, then the entity must acquire an EIN and not use the TIN of the single owner."
  
  Wow, kudos to IRS for being as clear as mud on their website.
  Much appreciation to you for taking the time to explain this. Thank you!
  So, just updating the operating agreement is sufficient, correct?
  [email protected]717-945-7040
  2 Reply
Mitchell Zoll
Attorney · Austin, TX · Member since 2018 · 112 posts · 78 votes
1y
Changing the company agreement (operating agreement) is the result, it’s not the way the ownership is transferred. I see so many folks starting businesses then not treating it like a business. Please go to a lawyer who has litigated these issues (not one who just has a notebook of nested entities to sell you) and they can show you what you need to do this right. Don’t start a business to avoid liability then do things half way and create liability in the future.
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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
1y
@Joe S.Since the LLC hasn't conducted any business and no bank account has been opened, below are two options to consider:
1. One way to adjust ownership is to amend the Operating Agreement and, if required by your state, file an Amended Articles of Organization to reflect the new ownership percentage. If the LLC already has an EIN, you may also need to update the IRS and possibly file Form 8832 if changing the tax classification.
2. Another option is to dissolve the current LLC and start a new one with both of you as owners, which may be simpler if the existing LLC structure doesn't align with long-term goals.
One tax-related consequence to keep in mind is that a single-member LLC (SMLLC) is reported on the son’s personal tax return (1040), while a multi-member LLC requires filing a separate partnership tax return (Form 1065). Consulting an attorney would be best to determine the right legal structure and ensure compliance.
This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.
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