Selling a share in an LLC: step-by-step instructions

Contents:

• Features of selling a share in a company
• Features of selling a share to third parties
• Registration of the sale of a share in an LLC through a notary
• Step 1. Study the charter of the LLC
• Step 2. Check the payment of the share in the authorized capital
• Step 3. Obtaining permission from the government commission (if necessary)
• Step 4. Notifying all participants and the company about the sale of the share
• Step 5. Preparing the necessary documents
• Step 6: Notarized registration of the transaction
• Step 7. Sending a notification to the tax office
• Period for registering the purchase and sale of a share
• Taxes when selling a share in an LLC

Registering the sale of a share in an LLC through a notary is a standard procedure for transferring ownership of a business to another person. In this article, we will consider in detail the circumstances under which such a transfer can occur, as well as the procedure for registering the sale of a share in an LLC with a notary.

Features of selling a share in a company

Selling a share in an LLC begins with preparatory activities. First of all, a participant must check whether the LLC charter prohibits the following things:

• Changing the ratio of shares among the company’s participants. Such a restriction will make it difficult to transfer a share to another participant in the company.
• Alienating through the sale of a share to third parties who are not participants in the company.

The seller must remember the preemptive right of other participants to purchase his share, which consists in the primary offer of a share to other members of the company. This obligation is enshrined in paragraph 4 of Article 21 of Federal Law No. 14-FZ “On LLCs”. Other participants-founders of the company have a preferential right to purchase the share of their partner. Such a right may also be granted to the company itself.

Before the transaction, the seller must do the following:

• Make an offer to purchase a share for other participants. To do this, you need to send an offer to the company’s address. The remaining founders can accept the offer to purchase a share within a month from the date of receipt of the notification.
• Make an offer to purchase a share by the company itself. In this case, the thinking period is reduced to one week.

If the participants or the company do not want to buy out the share, then only in this case can the seller offer it to a third party – not one of the current founders. However, you should always look at the charter, which may contain other conditions.

It is important to understand that if a participant sells a share to another participant in an LLC, then there is no need to send a notification to other founders. In this case, you can immediately begin to draw up documents, the list of which includes:

• Proof of ownership – an extract from the Unified State Register of Legal Entities, a memorandum of association, a purchase and sale agreement, or a certificate of inheritance
• Proof of payment by the seller of his share in the authorized capital of the LLC (this may be a payment order)
• Notarized consent of the seller’s spouse to sell the share, if the share was purchased or the right to it arose in an official marriage

The purchase and sale agreement is drawn up based on the requirements of Article 454 of the Civil Code of the Russian Federation. It specifies the details of the seller and the buyer, information about the share in the company, and the procedure for payment in cash. It is important to submit all the collected documents to a notary to certify the purchase and sale agreement and notify the Federal Tax Service and the LLC of any changes in the composition of the participants.

Features of selling a share to third parties

Registration of the sale of a share in an LLC with a notary is the same regardless of who the share is sold to – a third party or a participant in the LLC. In this case, the seller also needs to:

• Draw up an offer for the other participants in the company so that they can exercise the preemptive right of redemption
• Obtain the consent of the participants to sell the share to a third party, if required by the charter
• Prepare a purchase and sale agreement and other documents that we mentioned earlier
• Submit the documents to the notary to complete the registration

Registration of the sale of a share in an LLC through a notary

The process of selling a share in an LLC is quite labor-intensive. It involves following certain steps.

Step 1. Study the charter of the LLC

One of the most important actions is to study the charter of the LLC. It may contain restrictions on the sale of a share. For example, the charter may prohibit the sale of a share to third parties, requiring the prior consent of the other participants.

What to do if the charter prohibits the sale to third parties?

• Talk to the participants of the LLC. They may support you and agree to sell the share despite the restrictions in the charter.
• Change the charter. Call a meeting of the participants and amend the charter to allow the sale of the share to third parties.

What to do if the charter requires the consent of the participants?

• Officially notify the participants of the sale. Send them a written notice of the desire to sell their share, including the terms of sale, information about the potential buyer and the deadline for a response.
• Wait for a response. If within 30 days (or another period specified in the charter) you do not receive a refusal from the other participants, it is considered that they have given their consent.

Step 2. Check the payment of the share in the authorized capital

The next important point: the share in the authorized capital must be fully paid. If the share was paid for in money, then you must have a cash receipt order on hand for the contribution of money to the company or a payment order for the transfer of funds to the company’s account.

If the share was contributed in property, then it is necessary to provide an act of acceptance and transfer of property or an act of property valuation. These documents are required for notarization of the transaction.

Step 3. Obtaining permission from the government commission (if necessary)

If the participant in the transaction is a resident of an unfriendly country, then before certifying the transaction with a notary, it is necessary to obtain permission from the government commission to sell a share in the LLC. This process is quite labor-intensive and takes at least 2-3 months.

To obtain permission, it is necessary to submit an application and a number of additional documents to the Ministry of Finance through the relevant ministry (depending on the type of activity). The sample form of the application has been approved by the Government Commission and must contain:

• An appeal to the commission with a request to issue a permit
• The purpose, subject, content and essential terms of the transaction (operation)
• The planned validity period of the permit

In addition to the application, it is necessary to provide:

• A document confirming the fact of registration of the company or individual entrepreneur, or an identity document of the applicant – an individual
• Constituent documents of the applicant – a company
• Information on beneficiaries, beneficial owners, a controlling person who is a party to the transaction (participating in the operation) a person of a foreign state committing unfriendly actions
• The balance sheet of the resident if it is not available in the state information resource of accounting (financial) reporting, information on the book value of the resident’s assets, if the transaction gives rise to the right of ownership of the resident’s real estate
• An assessment of the market value of the share
• Performance indicators for the future buyer of the share
• A letter on voluntary payment of a percentage of the transaction amount to the budget

There is a specific form for submitting documents. If they are written in a foreign language, they must be apostilled with a notarized translation. They must also be stitched and certified with the applicant’s seal. Then they are certified by the signature of an individual, the authenticity of which is certified by a notary in the manner prescribed for the applicant.

The application may be submitted in person by the applicant or his representative by power of attorney with an inventory. The necessary documents and the application may be submitted to the authorized body both on paper and electronically using an electronic digital signature.

Once permission has been received, you can prepare for the notarization of the transaction for the sale and purchase of the share.

Step 4. Notifying all participants and the company about the sale of the share

It is important to notify other participants of the company in writing of your intention to sell the share. In the notification, it is important to indicate the terms of the sale, information about the potential buyer, as well as the response time.

Step 5. Preparing the necessary documents

To formalize the sale of a share, you will need the following documents:

• Charter of the LLC
• Certificate of state registration of the LLC
• Minutes of the meeting of participants
• Agreement of sale and purchase of a share
• Documents confirming payment for the share
• List of LLC participants
• Notarized consent of the spouse of the participant in the transaction

Step 6: Notarized registration of the transaction

To formalize the transaction, it is important to contact a notary. He will check the documents for compliance with the law, certify the signatures of the parties on the sale and purchase agreement, and also make changes to the Unified State Register of Legal Entities about the new participant/change in the size of the shares.

Step 7. Sending a notification to the tax office

After the transaction is concluded, the notary will notify the tax office about changes in the composition of the LLC participants. The Federal Tax Service must register the changes within 5 working days after submitting the information. Based on the results of registration, the tax authority issues a sheet of the Unified State Register of Legal Entities with new information about the participants and the sizes of their shares.

The list of required documents is established by the Government and includes, in addition to the application, an assessment of the market value of the share, the company’s performance indicators for the future buyer, as well as a voluntary commitment by the seller of the share to pay a percentage of the transaction amount to the budget and other documents.

Period for registering the purchase and sale of a share

Information about the purchase or sale of a share in the company will be entered into the Unified State Register of Legal Entities within 5 working days from the date of submission of the necessary documents. Registration data can be verified on the official website of the Federal Tax Service of the Russian Federation.

Taxes when selling a share in an LLC

The sale of a share is accompanied by the mandatory payment of personal income tax in the form of taxes. It is important to calculate the amount of deductions independently. For tax residents of the Russian Federation, the rate is 13%.

Personal income tax may not be paid by individuals who have owned a share for more than 5 years. If the value of the share has changed during the period of ownership, then the tax will not be levied on the income that relates to that part of the share that a person has owned for more than 5 years. The tax is paid annually before July 15. Declaration 3-NDFL is submitted before April 30 of the year following the year of sale of the share.

Results

Selling a share in an LLC is a serious decision that requires careful preparation and legal support. Correct observance of all formalities and legal norms will help to avoid problems in the future and ensure the safety of the transaction.

Q&A