Single Member LLC to Multiple Member LLC

A single-owner LLC is a "disregarded entity" assuming it has not made the election to be taxed as a corporation. If the single-owner LLC brings on a new member, the entity ceases to be a disregarded entity and a partnership is created for federal tax purposes. If the new owner pays the old owner for an interest then a deemed sale of assets occurs and the old owner recognizes gain or loss. If the new owners contributes money, then the adjusted basis changes for the old owner to reflect the new percentages of ownership.