The owners of a limited liability company (LLC) are called its members. Each member holds a percentage of ownership in the LLC. Sometimes, non-economic members and assignees also have ownership interests. The LLC itself owns assets registered under its name.
Members have limited liability from lawsuits and creditors. Expenses like maintenance may count as business expenses.
Public Records and Anonymity
Members are listed on an LLC’s ownership documents. The public can access LLC records through a state’s business entity register. An LLC provides anonymity to owners.
Ownership Division
Ownership of an LLC can be expressed in two ways: by percentage or by membership units. Ownership confers voting and profit participation rights. An LLC can allocate ownership in any way it sees fit, unlike a corporation.
An LLC provides owners liability protection with pass-through taxation. An LLC shields assets while reducing potential liabilities.
Management Structure
LLC members appoint a manager to handle operations in a "manager-managed LLC". In a "member-managed LLC", members share running the company. Member-managed LLCs grant members direct control but require more effort to ensure smooth operations.
Corporate Features and Taxation
An LLC combines corporate and partnership features. LLCs limit owners’ liability if the business fails. Profits "pass through" and owners pay personal income tax. An LLC with multiple members can make special allocations of profits and losses for tax and other reasons.
Ownership Involvement in Other LLCs
Yes, an LLC can own 50% or more of another LLC. This parent or holding company invests in other companies. Asset protection and tax considerations apply.
Owning a property as an LLC allows members to report income or losses on the property on their individual tax returns. Having an LLC with multiple members allows each person to determine a percentage of ownership in the real estate investment.
However, there are some disadvantages to using an LLC for property ownership. The due-on-sale clause in a mortgage loan agreement states that if an individual sells their property to an LLC, the borrower must pay the remaining mortgage balance in full. Additionally, in the UK property investors are subject to an extra 3% stamp duty for a limited company surcharge when purchasing residential properties not intended to be the buyer’s primary residence. Companies are also required to comply with various reporting and filing obligations.
There are added costs and fees to create and maintain an LLC, more than a sole proprietorship or general partnership. Many states also charge initial fees and taxes on processes such as annual reports or franchise taxes.