Good Morning!

1. Feature: Who Really Owns Your LLC When You’re Gone (3 min)

2. From the Archive:

   • Cash Flow Forecasting Errors That Sink New Ventures

   • Understanding LLC Capital Accounts: A Bitcoin Bonanza Explains It All

3. Dear TCoL: I need a very quick (1-day preferably) LLC formation

Use today to plan for the week ahead.

-TCoL

Missed our last feature article? The Quiet Limits on LLC Ownership

Transferring your Limited Liability Company (LLC) ownership interest into a revocable living trust is a smart estate planning move. It helps you avoid probate, maintain privacy, and ensure business continuity. But the process has legal, practical, and contractual twists that deserve careful attention. This article breaks down the key issues: sole-member vs. multi-member LLCs, operating agreements, government contracts, and the practical steps to a valid assignment.

Why Transfer LLC Ownership to a Revocable Trust?

A revocable living trust gives you the flexibility to manage your assets during life and pass them on without the delays of probate. It can:

• Avoid Probate: LLC membership interests are personal property. If held individually, they’re subject to probate at death, which is time-consuming and costly. A trust bypasses that.

• Ensure Continuity: If you become incapacitated, a successor trustee can step in to manage the LLC.

• Protect Privacy: Probate is public; trusts are not.

• Provide Flexibility: You can retain control as trustee and beneficiary, and amend or revoke the trust at will.

• Offer Limited Asset Protection: While not as protective as irrevocable trusts, a revocable trust simplifies management and reduces some risks.

Legal and Practical Considerations

Before making the transfer, you’ll need to examine state law, your LLC’s governing documents, and your contracts. Let’s break it down:

1. Sole-Member vs. Multi-Member LLC

• Sole-Member LLC (SMLLC): You’re the only owner, so the transfer is simpler. Still, review your operating agreement and state laws. Most states allow a trust to be the sole member of an LLC.

• Multi-Member LLC (MMLLC): Things get more complex. You’ll likely need consent from the other members. Transfers may trigger buy-sell clauses, rights of first refusal, or other restrictions. Read the operating agreement carefully, and talk with your partners.

2. The Operating Agreement

This document governs how ownership can be transferred. Look for:

• Transfer Restrictions: Many agreements limit or prohibit transfers to third parties (including trusts) without approval.

• Consent Requirements: For MMLLCs, you might need majority or unanimous approval.

• Buy-Sell Provisions: These could require you to offer your interest to existing members first.

• Membership Classes: Different classes (voting vs. non-voting) can affect how your trust holds the interest.

• Transfer Procedures: These may include notice requirements or necessary amendments.

If your LLC doesn’t have an operating agreement, state default rules apply, and they may be strict. In an MMLLC, that could mean unanimous consent is required. You may want to amend your agreement before making the transfer.

3. Contracts That Could Trip You Up (Especially Government Ones)

Transferring ownership might create problems if your LLC holds contracts, especially government or SBA-certified contracts.

• SBA Rules: If you’re in a program like the SBA 8(a), SDVOSB, or minority-owned business certification, ownership and control matter. The SBA typically requires the qualifying individual (e.g., the service-disabled veteran) to own and control at least 51%. A revocable trust may work — if you remain both trustee and beneficiary. But you must notify the SBA, and you may need approval.

• Other Contracts: Commercial leases or loans may include “change of control” provisions that require notice or consent.

When in doubt, consult with a government contracts attorney or SBA specialist.

4. State-Specific Rules

Every state’s LLC and trust laws differ. Watch for:

• Filing Requirements: Some states require amended Articles of Organization if there’s a new member or a change of more than 20% ownership.

• Trust Provisions: Your trust must be able to own and manage business interests. Some states require specific trust language.

• Tax Implications: Generally, no tax issues arise when transferring to a revocable trust (since it’s a “disregarded entity” under IRS rules). But that changes if the trust is irrevocable. Talk to your tax advisor.

5. Is Your Trust Ready?

Make sure your trust agreement:

• Authorizes the trustee to manage business interests.

• Names a successor trustee who’s capable of running the LLC.

• Aligns with your operating agreement, especially on voting and management rights.

If not, have your estate planning attorney update it before transferring ownership.

Practical Steps for a Valid Transfer

Here’s your roadmap:

1. Review Governing Documents: Start with your LLC’s operating agreement, buy-sell provisions, and contracts. Secure necessary approvals.

2. Hold a Meeting: Whether you’re a sole member or part of a group, record the transfer with a resolution authorizing it. We’ve included a sample resolution in our template.

3. Draft an Assignment of Membership Interest Agreement: This is the heart of the transaction. Include:

   • The percentage interest transferred (usually 100% in an SMLLC).

   • The effective date.

   • Signatures from the LLC (for approval/consent), you (assignor), and the trustee (assignee).

   • Consideration (a nominal amount like $10 is common for estate planning transfers).

4. Update LLC Documents:

   • Amend the operating agreement to reflect the trust as the new member.

   • Amend Articles of Organization with your state, if required.

5. Notify Stakeholders: Let your bank, partners, lenders, and any government agencies (including the SBA) know. Update licenses, permits, and accounts.

6. Record the Transfer Internally: Update your membership ledger and keep a clean record of the resolution, agreement, and updated documents.

7. Consult the Pros: Legal and tax advisors are your best allies. Government contract holders should also loop in their compliance teams or SBA reps.

Final Thoughts

Assigning your LLC interest to a revocable trust can help you avoid probate, protect privacy, and keep your business running smoothly, but the details depend on your LLC, your trust, and your state. To make it easier, Premium subscribers get access to our customizable “Assignment Template: LLC Interest to Revocable Trust,” which includes a resolution and assignment clause that can be adapted for sole or multi-member LLCs. Review your documents, check your contracts, use the template, and most importantly consult the right professionals.

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Dear TCoL: I need a very quick (1-day preferably) LLC formation

Question: I need a very quick (1 day preferably) LLC formation. Where can I set one up myself, and do I need an operating agreement?”

Answer: Most states can form an LLC in a week. A few can do it in a day. Only two can do it the same day with a little cash and no red tape.

Wyoming: Quickest and Easiest

Wyoming has quietly become the small-business favorite for no-nonsense LLCs.
You can file online directly with the Secretary of State and often receive approval within 24 hours — no attorney, no mail delays, and no drama.

• Filing fee: $100 + $2 online convenience fee.

• Expedite option: Not required—standard processing is already same-day or next-day.

• What you’ll need: Your company name, business address, and either your own Wyoming address or a registered agent (many cost about $50 a year).

Wyoming’s system is so streamlined that you can go from “idea” to “approved LLC” before lunch. You’ll get a stamped Certificate of Organization by email, ready to open a bank account or sign contracts.

Nevada: Fast but Costly

Nevada competes for speed and wins, if you’re willing to pay for it.

The state offers several expedited levels:

• 24-hour processing: +$125

• 2-hour processing: +$500

• 1-hour processing: +$1,000

Add those to the regular fees (around $425 total once you include the initial list and business license), and you can walk away with an LLC in hours instead of days.

It’s overkill for most small operators, but if your deal depends on having an entity number today, Nevada will happily take your money to make that happen.

Delaware: Reliable and Business-Friendly

Delaware processes standard filings in 1–3 business days, but you can pay +$100 for same-day service.
It’s a clean, business-minded system favored by investors and corporations. If you might seek outside capital later, Delaware is a safe long-term bet even if it takes one day longer than Wyoming.

Florida and Texas: Respectably Fast, Not Instant

• Florida processes online filings in 1–3 business days but offers no official expedite.

• Texas allows a $25 expedited handling fee, which usually brings approval in about two days.

Both are fine choices if you’re forming where you live. But for pure speed, Wyoming still wins.

Filing Yourself: The Five-Minute Path

You can form an LLC directly through a state’s website, with no middleman required.
Here’s the short version, using Wyoming as an example:

1. Go to sos.wyo.gov and click Start a Business.

2. Select “Limited Liability Company (Domestic).”

3. Enter your company name and registered agent information.

4. Pay the filing fee online with a card.

5. Approval usually lands within hours.

That’s it. You’ll receive two PDFs:

• Certificate of Organization (proof you exist).

• Filed Articles of Organization (your application stamped by the state).

With those, you can apply for an EIN at irs.gov (free, instant), then open a bank account the same day.

If you’d rather not use your home address, appoint a Wyoming registered agent, and they provide a business address and forward mail for about $50-$250 per year.

Do You Need an Operating Agreement

Legally, most states don’t require one at formation.
Practically, you absolutely do.

Without one, you invite confusion over ownership, especially if you later add partners. And in a lawsuit, the absence of an Operating Agreement can make it easier for someone to “pierce the veil” and reach your personal assets.

Upgrade your free subscription to Premium and we’ll send you our professionally prepared Single-Member LLC Operating Agreement template. It’s state-neutral, built for clarity, and ready to customize. 

That document, paired with your formation certificate, gives you full legal footing in the same day, ready for business.

The Simple Plan

1. Form your LLC online in Wyoming (or Nevada if you need it within the hour).

2. Download your stamped Certificate of Organization.

3. Get your EIN immediately at irs.gov (no charge).

4. Sign your Operating Agreement.

5. Open your business bank account.

Five steps. No lawyers. No overnight couriers.

If you just need to “get legal” by tomorrow, Wyoming is your best launchpad. If you need the entity number in an hour and have larger budget, Nevada can do it faster than anyone else.

Wherever you file, finish the job with an Operating Agreement, it is the simplest insurance policy you’ll ever sign.

Have an interesting business question and need a free bit of advice? Send your question to [email protected]. No confidential info, please!