Can LLC Units Be Diluted? Ownership Structure in LLCs

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  • LLC Ownership Representation: An LLC uses membership units to represent ownership.
  • Key Points:
    • LLCs use membership units, not shares
    • Units represent profits share
    • Members can sell or transfer units
    • LLCs allow flexible ownership structures
    • Operating agreement governs ownership details

Can LLC Members Have Different Percentages?

An LLC uses membership units to represent ownership. Members can sell or transfer units. Operating agreement describes ownership terms.

  • LLCs allow flexible ownership structures. Units allot earnings based on contributions. Members can have different percentages. You can change percentages by amending the operating agreement.

  • Ownership percentage determines share of profits and losses. It also determines personal liability for loans. Consulting an attorney can help avoid surprises.

  • You record ownership percentage in the company books. It’s called Accumulated Adjustments Account. Comply with state laws on forming an LLC.

  • Membership interest equals ownership percentage. You cannot freely transfer membership interest. Use Membership Interest Assignment to transfer entire interest.

  • You can form LLC for any legal reason. Can operate under two names with Certificate of Amendment. Ownership percentage has little governance effect without amending operating agreement.

Can an LLC Be Divided into Shares?

An LLC uses membership units to represent ownership. Members can sell or transfer units. Operating agreement describes ownership terms.

  • LLCs allow flexible ownership structures. You can change percentages by amending the operating agreement.

  • Ownership percentage determines share of profits and losses. It also determines liability for loans. Consulting an attorney can avoid surprises.

  • You record ownership percentage in company books as Accumulated Adjustments Account. Comply with state laws on forming an LLC.

  • Membership interest equals ownership percentage. You cannot freely transfer membership interest. Use Assignment to transfer entire interest.

  • You can operate LLC under two names with Certificate of Amendment. Ownership percentage has effect by amending operating agreement.

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