What Is an LLC Member? (Everything You Should Know)

Delina Chantel Yasmeh
Published by Delina Chantel Yasmeh | Author
Last updated: April 10, 2024
FACT CHECKED by Lou Viveros, Growth & Transition Advisor
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An LLC member is a vital component of a Limited Liability Company, holding ownership and decision-making power within the business structure.

With extensive expertise as a business consultant specializing in LLCs, I've guided numerous clients through the complexities of LLC membership, including rights, responsibilities, and the impact on business operations.

This article, backed by thorough research and insights from a panel of LLC experts, aims to equip you with essential knowledge about LLC members.

Quick Summary

  • An LLC member owns a share of the company, with rights, privileges, and limited liability for company debts.
  • Members and managers differ, with members owning the LLC and having limited daily management roles, unlike managers who handle day-to-day operations.
  • From March 2020 to March 2021, 1.1 million US establishments opened, while 965,995 closed, resulting in a net increase of 180,528. Therefore, it's crucial for LLC owners to acquaint themselves with all aspects of LLC management.
  • Drawing from my experience, there's no maximum number of members for an LLC, allowing flexibility in ownership structure.


What Is an LLC Member?

A limited liability company (LLC) member is a person who has purchased an interest in the LLC and owns a share of the company.

They are entitled to specific rights and privileges and can be held liable for debts and judgments that arise within the company.

However, LLC members cannot be held personally liable for any other acts committed by other members or employees of the company.

According to the Internal Revenue Service, limited liability companies (LLCs) with 2 or more members accounted for the majority (71.5%) of all partnership returns.

What Is the Difference Between a Manager and a Member?

A woman explaining the difference between a manager and a member

The difference between a manager and an owner is that the owners of an LLC are called members. They have rights and responsibilities and limitations on liability protections, which differ from those of the managers.

A member has a voice in how the LLC is run but does not participate in day-to-day management activities, such as filing reports or paying salaries.

By contrast, a manager is a person who runs the business on a day-to-day basis.

For our LLC, we appointed a manager to handle company affairs and specific operative responsibilities.

How to Add LLC Members?

Shaking hands with someone as a sign of agreement

You need to draft and sign an LLC operating agreement to add LLC members.

An LLC operating agreement has legal force, so either party can enforce it in court if they believe it is being violated.

For our LLC, we consulted the operating agreement to determine how many LLC members there are, how LLC members are added or removed, and other member rights and responsibilities.

It is called an LLC "membership" amendment or LLC "membership" certificate when LLC members are added [1].

When our LLC was adding members, we created a new LLC membership agreement that detailed the addition of the new LLC members and how they would be involved in company affairs.

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What Is the Maximum Number of Members in an LLC?

There is no maximum number of LLC members.

As long as the LLC operating agreement allows it, an LLC can have any number of members. However, there are tax implications for having a very large number of LLC members.

Liability of Members

Man reporting and standing while holding a clipboard with files

LLC members are not liable for the liabilities of their LLC. They are only liable to the extent they have invested in the company.

While members are not personally responsible for LLC debts, some states will consider LLC members individually responsible if they violate state law while carrying out their duties as a member.

Previously, this was very beneficial because it allowed individuals to avoid personal liability.

However, since LLC members are not liable for their LLC debts, the only way to collect from a member is to take their interest in the company.

"An LLC member is a vital component of the company's structure, contributing capital, expertise, and resources to drive its growth and success."

- Jon Morgan, CEO, Co-Founder and Editor-in-Chief of Venture Smarter

FAQs

How Many Members Are Considered Necessary for an LLC?

Generally, an LLC company must have at least two members; however, the company's operating agreement can allow for a single-member company.

Can an LLC Member Transfer Their Membership Interest to Someone Else?

Yes, an LLC member can generally transfer their membership interest to someone else, whether in a single-member LLC or a multi-member LLC. However, the transfer may be subject to any restrictions outlined in the LLC's operating agreement.

Can an LLC Member Be Removed or Expelled From the LLC?

In a multiple-member LLC, the operating agreement typically outlines the process for removing or expelling an LLC member. However, it's crucial to adhere to legal requirements and the terms of the operating agreement while considering the member's rights and the liability protection provided by the LLC structure.

References:

  1. https://www.sec.gov/Archives/edgar/data/1379661/000119312513003521/d461366dex991.htm

About The Author

Author
Delina Chantel Yasmeh, J.D./Tax LL.M, specializes in Mergers and Acquisitions at Deloitte and PwC, managing billion-dollar transactions. Educated in Accountancy at California State University and holding advanced degrees from Loyola Law School, she is highly skilled in tax law. Delina also dedicates time to pro bono work for women and children.
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Growth & Transition Advisor
LJ Viveros has 40 years of experience in founding and scaling businesses, including a significant sale to Logitech. He has led Market Solutions LLC since 1999, focusing on strategic transitions for global brands. A graduate of Saint Mary’s College in Communications, LJ is also a distinguished Matsushita Executive alumnus.
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