LLC Membership Types
Most states allow single-member LLCs and multi-member LLCs. An LLC’s membership is restricted if it elects S Corporation tax treatment, allowing up to 100 members.
Differences between Single and Multi-Member LLCs
Single and multi-member LLCs differ in taxation and ease of reporting income.
Forming and Operating an LLC
- To add an owner to an existing LLC:
- Understand consequences
- Review the operating agreement
- Decide specifics
- Prepare/vote on amendments
- Amend articles if necessary
- File any required tax forms.
Ownership and Management Structure
In a multi-member LLC, members share control and decision-making. The operating agreement outlines ownership percentage, reflecting share of profits, losses, and authority. Management structure can be member or manager-managed.
Single-Member LLC vs. Multi-Member LLC
A single-member LLC has one owner. A multi-member LLC can have two or more owners. Some states require at least two members to form an LLC. If you only have one owner, you might add your spouse as a second nominal member.
LLC Membership Flexibility
The number of LLC members is flexible. There’s no maximum unless electing S Corporation status, limiting owners to 100. An LLC can have as few as two members or countless owners.
Contributions and Formation
Usually LLC members contribute capital or provide assets. Ownership percentage is generally contributions-based but members can agree on any split. Adult individuals, corporations, other LLCs, and foreign entities can usually form an LLC. Minor restrictions apply in some states.
Tax Treatment
Single and multi-member LLCs differ in taxation and reporting income. The single-member LLC reports business profit/loss on the owner’s taxes. An S-Corp can have shareholders report profit/loss on personal taxes.