Yes. A note owned by your LLC can be sold in the same way as one you hold personally. Because the company is the seller, the buyer will want proof that it exists, that it owns the note, and that the person signing has authority to sell.
First, confirm the LLC is the holder
Look at who the note is payable to and who is named as lender on the recorded mortgage or deed of trust.
| What the paperwork shows | What it means |
|---|---|
| The LLC is named as payee on the note and as lender on the mortgage or deed of trust | The LLC holds it, and nothing needs correcting. |
| You are named personally, but you treat the note as the company’s | On paper you hold it. A transfer to the LLC may never have been documented. |
| The note was assigned to the LLC later | There should be an endorsement on the note and a recorded assignment of the security document. |
If the names on the note, the recorded security document and your company records do not line up, sort that out before you ask for offers, because a mismatch found during the buyer’s checks can slow a closing or reduce a price.
Company documents a buyer asks for
These come on top of the standard file listed in documents you need to sell a note. The exact list varies by buyer and by state.
- Formation document. The articles of organization or certificate of formation filed with the state.
- Operating agreement. The document that says who the members are and who can act for the company.
- Proof of good standing. A current certificate or status record from the state where the LLC was formed.
- A resolution or written consent. A signed statement that the company approves this sale and names the person who will sign.
- Tax identification number. The company’s own number, if the closing agent asks for it.
Who signs, and how
The person with authority under the operating agreement signs. Depending on how the company is set up, that may be a manager, a managing member or all the members. They sign in the company’s name with their title, for example “Smith Holdings LLC, by Jane Smith, Manager”, so that the signature binds the company and not Jane Smith personally. A trustee selling a note held in a trust signs on the same principle, as trustee.
If the LLC has more than one member, read the operating agreement for what the sale of a major asset requires, which can be a vote or every member’s consent. Members are then in much the same position as two people selling a note they hold with a co-owner: the buyer will want to see that everyone whose consent is needed has given it.
When the company’s records have gaps
A lapsed LLC is the first thing to rule out. If annual filings or fees were missed, the state may list the company as inactive or dissolved, and it generally has to be returned to good standing before it can sign.
A company with no operating agreement may be able to give the buyer a signed statement of authority, or may be asked to have an agreement prepared. A member who has died or left the company can change who has authority to sign, and that calls for an attorney before a sale. If the company borrowed against the note, the lender holding that pledge has to be paid off or agree to the sale.
Where the money goes
Proceeds are paid to the LLC, into an account in the company’s name. A closing agent will not normally pay a member personally for an asset the company owns, and what the company then does with the money is governed by its operating agreement. How the sale is taxed depends on how the LLC is treated for tax purposes and on its basis in the note, which is a question for the company’s CPA, ideally before an offer is accepted.
Does the LLC change the price?
A buyer prices the payments, the payer, the property and the paperwork, and those are the same whoever the seller is. What company ownership adds to the usual steps of selling a note is checking, and tidy company records keep that short. Before you ask for a price on the note, confirm the payee name, pull the formation document and operating agreement, and look up the company’s status with the state.
Related questions
Do all the members of the LLC have to agree to the sale?
It depends on the operating agreement. Some give a manager authority to sell company assets, while others require a vote or every member's consent. Read yours, and ask an attorney if it is unclear.
Can the sale proceeds be paid to me personally?
The closing agent pays the company, because the company owns the note. Moving money from the company to you afterward is a matter for the operating agreement and your CPA.
What if my LLC has been dissolved?
The company's authority to sign may be in question, and how that is fixed varies by state. Speak to an attorney in the state where the LLC was formed before you take the note to buyers.