Fort Rucker, AL asked in Business Formation and Business Law for Indiana

Q: What forms must be submitted to IRS if my LLC brings on a new member

I am the sole member in my LLC, and am planning on adding one or two more members in the near future. There is no operating agreement therefor I am going off of Indianapolis law. It says it needs to be in writing, do I need to dissolve the LLC and form it with the new partners or can I sign documents saying they are members, their interests, financial investments, etc. And once performed, does the IRS have to be informed if I have an EIN number already.

1 Lawyer Answer
Michael Ray Smith
PREMIUM
Michael Ray Smith
Answered
  • Indianapolis, IN
  • Licensed in Indiana

A: If your LLC is currently taxed as a disregarded entity (i.e., like a sole proprietorship so that you report all the tax items on your Form 1040 instead of filing a tax return for the LLC), and you add members, you will need a new EIN. The LLC will then be taxed either as a partnership (the default status) or as a corporation. If you want the LLC to be taxed as a Subchapter S corporation, you'll need to file Form 2553 to elect that status. If you want it to be taxed as a Subchapter C corporation (an available option, but probably not the best), you'll file Form 8832 to elect that status.

If your LLC is already taxed as a corporation (either S or C), and you don't want to change that status, you don't need a new EIN and you don't need to file a new election.

I infer from your question that your LLC is organized in Indiana. Regardless of tax status, you don't have to file anything with the Indiana Secretary of State to add new members unless you want to make their identities a matter of public record. That's not required, but it can simplify things when it comes to opening bank accounts, etc. In addition, if the LLC is member-managed and you want to change it to manager-managed, or vice versa, you need to file articles of amendment to the articles of organization.

Regardless of what you do with tax status, you should have a written operating agreement. As a matter of fact, you should have one even if you don't add new members, but it becomes even more important if you do. When you go into business with other people, there are a host of questions that must be considered, many of which you never had to think about before, and the operating agreement is the way the answers are documented and enforced.

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