How to buy an LLC: membership interests or assets?

Published October 25, 2026 · Facts checked as of October 2026

Short answer

You can buy an LLC two ways. Buy its membership interests (you become the owner of the existing LLC, with all its contracts, history and liabilities), or have your own new entity buy the LLC's assets (you get the business but leave most liabilities behind). Most small business buyers choose the asset route.

If you buy membership interests, the operating agreement controls how transfers happen, and you need full diligence on everything the LLC has ever done.

People search "how to buy an LLC" for different reasons. Some want an existing business that happens to be an LLC. Others want an "aged" shell company for credit or credibility reasons. This page is about the first: buying an operating business organized as an LLC. (If you're thinking about buying an empty aged shell to look established to lenders, don't. Lenders look at operating history and tax returns, not formation dates.) Not legal or tax advice.

Two ways to buy

Buy the assets

Your new entity buys equipment, inventory, name, customer relationships and goodwill from the LLC. The LLC (still owned by the seller) keeps its liabilities and is usually wound down. You get a fresh start and generally a stepped-up tax basis.

Buy the membership interests

You buy the members' ownership of the LLC itself. Contracts, licences and accounts stay in place, and so does every liability, known or not.

Same business, very different exposure.

If you buy membership interests

Read the operating agreement. It may require consent of other members, give them a right of first refusal, or restrict transfers. If some members aren't selling, you'll be partners with them under that agreement.
Do full legal and tax diligence on the LLC: tax filings for every year, payroll taxes, sales taxes, litigation, contracts with change-of-control clauses, licences that require notice of ownership change. See legal due diligence.
Get strong representations and indemnities from the sellers, backed by a holdback or offset rights.
Check tax classification. A single-member LLC is generally disregarded for income tax; a multi-member LLC is generally taxed as a partnership unless it elected otherwise. Changing the number of members can change filings. Your CPA should map this out before closing.
Update records: operating agreement, member ledger, state filings as required, bank signatories, and IRS responsible party (Form 8822-B).

If you buy the assets

Form your own entity (often a new LLC), sign an asset purchase agreement with the seller's LLC, and transfer the assets at closing. Contracts, the lease and some licences must be assigned or reissued. The seller's LLC pays off its debts and usually dissolves after closing. See asset purchase agreements.

Worked example: the tax difference between the two routes

Illustrative example, not tax advice; your CPA will run your numbers

You pay $1,000,000 for a business organized as a multi-member LLC taxed as a partnership. Its equipment has a tax basis of $50,000 after years of depreciation. Buy the assets, and you and the seller allocate the price across asset classes on IRS Form 8594; say $200,000 to equipment and $800,000 to goodwill. You can depreciate the equipment again from $200,000, and goodwill is generally amortized over 15 years for tax purposes. That's about $53,000 a year of goodwill deductions ($800,000 ÷ 15) plus equipment depreciation. Buy the membership interests, and the default result is that the LLC keeps its old $50,000 basis in the equipment and no deductible goodwill, unless the partnership makes an election that adjusts the basis of its assets for the buyer (a Section 754 election, which your CPA can explain). The difference in deductions can be large enough to change what each route is worth to you.

Structure changes taxes for years. Decide with your CPA, not on habit.

Paperwork after you buy membership interests

Amend or restate the operating agreement and update the member ledger.
File any state amendments your state requires (some states list managers or members on public filings).
Update the IRS responsible party on the EIN with Form 8822-B, and check whether the LLC's tax classification changes (a single-member LLC that gains a second member generally becomes a partnership for tax purposes).
Check federal and state beneficial ownership reporting rules in effect at the time; FinCEN's page explains current federal requirements.
Change bank signers, payroll provider authorizations and tax agency contacts.
Notify the landlord, lenders and key customers as contracts require; change-of-control clauses may need consents.

When buying membership interests is the better route

Buying the LLC itself makes sense when what makes the business work can't easily move: government contracts, payer enrollments, certain licences or permits tied to the entity, long-term leases with no assignment right, or contracts with customers who won't sign new ones. It can also be simpler for very small businesses with clean histories. The trade-off is that you inherit everything, so diligence goes deeper and the purchase agreement leans on representations, indemnities and a holdback. Some buyers split the difference: they buy membership interests but have the seller clean up known issues before closing.

Red flags when buying an LLC's interests

Members who aren't all selling, or an operating agreement with transfer restrictions nobody has read.
Payroll tax filings that aren't current. Unpaid trust fund taxes are a serious liability.
Old lawsuits, warranty claims or customer disputes the LLC still carries.
Personal guarantees by the sellers on leases or loans that lenders and landlords will want replaced.
Licences or permits that turn out to be personal to a member and don't stay with the LLC anyway.

Questions to ask before buying membership interests

Who are all the members, and have they all agreed to sell?
What does the operating agreement say about transfers, consents and rights of first refusal?
How is the LLC taxed (disregarded entity, partnership or S corporation), and are all returns filed?
Are payroll and sales taxes current?
What contracts, leases and licences have change-of-control clauses?
Are there any lawsuits, claims, warranty obligations or regulator issues, past or pending?

Reading the operating agreement before you buy

When you buy membership interests, the operating agreement decides what you are actually getting. Read it, and every amendment, before you sign a letter of intent. The clauses that most often change a deal:

Transfer restrictions. Many agreements need consent of the other members, or give them a right of first refusal, before interests can be sold.
Admission of new members. Buying an interest may give you the economic rights only, not voting rights, until you are formally admitted.
Capital calls. Check whether members can be required to put in more money, and what happens if one doesn't.
Manager vs member managed. Confirm who has authority to sign contracts and open bank accounts after closing.
Tax elections. Ask whether the LLC is taxed as a partnership, an S corporation or a disregarded entity, and get the election paperwork. It changes how the purchase is taxed.
Buy-sell and drag-along terms. If you are buying less than 100%, these decide how you can exit later.

If you are buying all of the interests, you will usually adopt a new operating agreement at closing. If you are buying part, negotiate the changes you need as a condition of closing, not afterwards.

Which to choose

Default to assets. Consider membership interests when contracts, payer enrollments, government approvals or licences are tied to the entity and would be slow or impossible to move. The trade-offs are covered in detail in asset purchase vs stock purchase; buying LLC membership interests behaves like buying stock.

Frequently asked questions

Can you buy an existing LLC?

Yes, by purchasing the members' interests under a membership interest purchase agreement, following whatever transfer rules the operating agreement sets. The LLC continues to exist, with you as the member.

Does the EIN change when you buy an LLC?

If you buy membership interests, the LLC generally keeps its EIN, though changes in the number of members can affect its tax classification and filing requirements. If you buy assets through a new entity, the new entity has its own EIN. Ask your CPA.

Do I need to file anything with the state?

Usually you update the LLC's records and, depending on the state, file changes to managers, registered agent or annual report information. Your attorney will handle state-specific filings.

Why do sellers want to sell membership interests?

It's simpler for them and leaves all liabilities with the buyer. Depending on how the LLC is taxed, it may also affect the seller's tax. Expect to negotiate.

What happens to the LLC's bank accounts and debts when I buy membership interests?

They stay with the LLC, which you now own. Debts, credit lines, leases and personal guarantees the sellers signed don't disappear; lenders usually require payoff or new guarantees from you. Bank signers have to be updated with the new members' information. Get a payoff list and a UCC lien search before closing.

Can I buy an LLC with an SBA loan?

Yes. SBA 7(a) loans can finance either the purchase of an LLC's assets by your new entity or the purchase of its membership interests, under the change-of-ownership rules in SOP 50 10 8.1. The lender will want to understand the structure, and in a membership interest purchase it will look closely at the LLC's history and liabilities.

Sources

Related guides

General information, not legal, tax, financial or investment advice. Rules and lender practices change; check the linked sources and talk to your attorney, CPA and lender about your deal. Examples with named numbers are illustrations, not real businesses. OKtoBuy's Deal Check does not value businesses or give price opinions.