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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 90269
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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I currently have a single member LLC. I need to change it to

Customer Question

I currently have a single member LLC. I need to change it to a multi-member llc. Its currently taxed as an s-corp. What exactly do I need to do to complete this change? I'm less worried about what i need to do internally (update operating agreement, etc...) and more about what information and documents I need to send to the IRS, State of Pennsylvania, City of Pittsburgh, or any other place. If you could tell me exactly what I need to do, that would be great. Thanks
Submitted: 5 years ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 5 years ago.
First, to add members to an LLC you would do this by amending your articles of organization with the Secretary of State and adding the new members. You would also amend your bylaws/membership agreement which would include rules for removal of members, voting rights, responsibilities of members, percentage of ownership of members, and any other regulations you want that you want to specify.

As far as taxation, when you say it is "currently taxed like an S-corp," this tells me you really are not familiar with an LLC and you perhaps expect this to change, but it will not change. An LLC is a "flow through" entity for the purposes of taxation and all of the members pay taxes on the profits of the LLC based upon their percentage of ownership. The LLC files a corporate tax return, but pays no taxes, and each member is issued a K-1 Form which details that member's tax liability based upon their percentage of ownership. This does not change and you need to make no notice to the IRS or anyone other than updating the operating agreement with the Secretary of State's office and perhaps updating your annual report if you are going to be changing officers around or adding new ones.

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Customer: replied 5 years ago.
Thanks. The IRS just passed new tax rules for taxation purposes for adding a member into an llc, so the reason i said that i was taxed as an s-corp was because i was wondering if that would make a difference for those new rules, but i guess i should ask a tax person about that.

When I signed up for the EIN, i checked the box that said sole-member llc. I was wondering if I had to contact the IRS to change that to let them know that its a multi-member llc now (and whether I have to actually give them the name of the other person)
Expert:  Law Educator, Esq. replied 5 years ago.

Single member LLCs are treated differently for federal income tax purposes than multi-member LLCs. For federal tax purposes, the single member LLC is ignored and the owner simply reports income and expenses on Schedule C of his or her 1040.

Under the IRS rules, you need a new EIN if the current one is under your name or under your name and the name of the LLC. However, if your EIN is under only the LLC name, you do not need a new EIN. See: http://apps.qai.irs.gov/businesses/small/article/0,,id=98011,00.html

As far as Articles of Organization, you need to update those and file them with the Sec of State.

Customer: replied 5 years ago.
Here is the Pennsylvania articles of organization:
http://www.dos.state.pa.us/corps/lib/corps/20/7/8913.pdf
It never really asks for the names of members. Do I still need to notify them/file an ammendment?
Expert:  Law Educator, Esq. replied 5 years ago.
It is not mandatory, but you should amend it by attaching the list of the members of the corporation where it says "additional provisions" since the members are supposed to be added after the organizers form the LLC, since many times when an LLC is organized the members are not available, but should be added when the LLC is finally formed.

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