An Arizona LLC is a legally recognized entity whose members have enforceable rights in Arizona courts. Without written documentation proving who the owners are, their ownership percentages, and when those interests were acquired or transferred, disputes can arise that are nearly impossible to resolve without litigation.

For example, a member who orally says "I quit" when the LLC is in financial trouble may return years later — when the company is profitable — and claim continued ownership. If the only written record is the Articles of Organization that still lists that person as a member, a court may struggle to rule against them. Written documentation eliminates this risk entirely.

A member-managed LLC must file an amendment to its Articles of Organization with the Arizona Corporation Commission within thirty days after any change in its members — whether a member is added, removed, or there is any other change in the membership. There is no minimum ownership threshold for member-managed LLCs. Any change in members triggers the filing requirement under A.R.S. § 29-3202.B.

A manager-managed LLC must amend its Articles of Organization within thirty days when:

• Any manager is added or removed; or
• A member is added or removed who owns, or will own, twenty percent or more of the profits or capital of the company.

If a member in a manager-managed LLC owns less than twenty percent of the company's profits or capital, the LLC is not required to amend its Articles solely because of that member change. The other documents — Assignment, Operating Agreement amendment, and Resolution of Members — are still required.

Under Arizona LLC Act Section 29-3401.C, if the Operating Agreement does not specify a lower approval threshold, a new member may only be admitted with the affirmative vote or consent of all existing members. This unanimous consent rule is the default under Arizona law.

If your Operating Agreement authorizes new member approval by less than all members — for example, a majority vote — then that lower threshold governs. In either case, always document approvals and disapprovals in writing to prevent future disputes about whether consent was actually given.

An Assignment of Membership Interest Agreement is the legal document that transfers LLC ownership from one party to another. It is the LLC equivalent of a real estate deed — just as you would never buy a home without a deed, you should never acquire or transfer an LLC membership interest without this document.

The Assignment identifies:

• The transferring party (seller or assignor);
• The receiving party (buyer or assignee);
• The exact percentage interest being transferred; and
• The effective date of the transfer.

Without an Assignment, the parties will have great difficulty proving that any transfer occurred at all, or proving when it occurred.

The Amendment to the Operating Agreement should address every change produced by the membership transfer, including:

• Removing the names of all departing members;
• Adding the full legal names of all new members;
• Adding the notice addresses for new members;
• Updating the ownership percentage for each member after the change;
• Reflecting any change in managers; and
• Covering any other terms and conditions negotiated as part of the transfer.

All members — including new members — should sign the amended Operating Agreement. The Operating Agreement is the primary document that evidences ownership of the LLC and the rights and obligations of the members, so keeping it current and fully signed is essential.

A Membership Interest Purchase Agreement is a binding contract that sets out the terms and conditions of a sale of LLC membership interests — including the purchase price, payment schedule, closing date, and any other terms the parties negotiate. It is especially important when the transfer involves a substantial sum of money.

For transfers involving no consideration or only nominal consideration — such as adding a spouse, transferring to a revocable trust, or gifting a small interest to a child — an Assignment of Membership Interest Agreement alone is generally sufficient. For significant cash transactions, the Membership Interest Purchase Agreement creates a legally binding obligation and documents the deal's economics in detail.

Failing to properly document membership changes creates several serious risks:

• A former member can claim continued ownership after an informal departure.
• Members may dispute what percentage each person owns after a transfer.
• The effective date of a transfer may be impossible to prove without signed documents.
• The ACC's records may continue to show a former member as current, creating confusion with banks, lenders, title companies, and courts.

All of these disputes frequently result in litigation that costs far more than having an attorney prepare the correct documents when the change occurs. The best time to document a member change is the moment it happens — not months or years later when memories fade and relationships sour.

Richard Keyt charges the following fixed fees:

• $450 for the standard member change package (Assignment of Membership Interest Agreement, Amendment to the Articles of Organization, Resolution of Members, and related documents) — for one transferring party and one receiving party.
• $247 additional if you also need a new or amended single-member Operating Agreement.
• $697 additional if you also need a new or amended multi-member Operating Agreement.
• $195 for each additional Assignment of Membership Interest Agreement when the transaction involves more than one recipient or transferring member (a married couple who own their interest as Arizona community property counts as one member).

For transactions involving significant consideration that require additional documents such as a Promissory Note, Security Agreement, or Noncompetition Agreement, call Richard Keyt at 480-664-7478 for a quote.

Richard Keyt and Richard C. Keyt do not charge for initial questions about documenting a member change.

Complete and submit KEYTLaw's online Member Change Questionnaire. Richard Keyt and his son and law partner Richard C. Keyt will prepare all of the documents required to evidence adding or removing a member, or increasing or decreasing a member's ownership percentage.

You may also reach them directly:

• Richard Keyt — 480-664-7478
• Richard C. Keyt — 480-664-7472

Neither attorney charges for initial questions about member changes. Do not delay — document the change while the facts are fresh and all parties are cooperative.