A limited liability company (LLC) is one of the most popular types of business structures, in part because of the tax benefits associated with operating it. When an LLC merges with another company, there is a good probability that both companies will be operating under an LLC business license. This complicates the process in no way at all. In fact, the transition may be simplified since both sides will already be familiar with the same set of business rules.
Create a document that records the details of the merger proposal. Outline how the new company will operate, how the board of directors will be set up and what role each of the original companies will play in the new entity.
Distribute a copy of the document to the shareholders of each company. This is best done at a shareholder meeting, where management can explain the benefits of the merger and answer any questions that shareholders may have.
Hold a vote to approve the merger. Each LLC must approve the merger with its own vote, which is held according to the rules of the company’s articles of incorporation. This is typically one vote for each share the person holds, with votes accepted either in person, by mail or by proxy. If shareholders fail to approve the merger, draft a new set of proposed terms to address any concerns, then have each company vote on the new proposal.
Start a new LLC by filing paperwork with the secretary of state and paying any relevant filing fees. Establish the LLC using the board of directors that has the approval of both companies’ shareholders. The new LLC will represent the collective identity of the two merged companies.
List the shareholders of the first two LLCs in the member directory of the new LLC. Allocate a number of shares to each member that is proportionate to the number of shares held in their old company. As the new shares are issued, the old shares will be canceled.
File reorganization papers with the secretary of state. Each LLC should fill out the forms to reorganize their structure. The purpose of the form is to change the current ownership distribution and to make the company a wholly owned subsidiary of the new LLC.
Tip
You can also take a reverse approach to your merger. Rather than starting a new LLC that will serve as a parent to the two existing companies, you can start a new LLC that will be jointly owned by the existing businesses.
