What Is an LLC Member? (Everything You Should Know)
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, they cannot be held personally liable for any other acts committed by other members or employees of the company.
A member of an LLC isn't a shareholder in a corporation and doesn't receive stock in the company.
Unlike with corporations, this type of business structure allows for single-member LLCs (with only one owner) and multiple-member LLCs (where several people own shares in the company).
What Is the Difference Between a Manager and a Member?
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. They are appointed by the members to handle company affairs and have specific responsibilities, which vary depending on how the limited liability company is organized.
Furthermore, a manager is not an owner of the company and is therefore not a member.
Who are the LLC Managers?
An LLC manager is an individual who has been given the authority to make company decisions. A company's operating agreement will determine the number of managers, how they are appointed or removed, and what responsibilities they have.
A company may choose to appoint co-managers who share managerial responsibility. This can be beneficial when one manager lives in another country or is not available to perform their job.
A company may also decide that certain decisions require the approval of managers, co-managers, or non-manager owners.
This is called "supermajority" and generally consists of two-thirds or three-quarters of company members agreeing with a particular decision.
Upon formation, a limited liability company can decide whether the limited liability company will be managed by its members (member-managed LLC) or hire a manager to manage the company (manager-managed LLC).
Does an LLC Have a President?
A limited liability company may have a president but is not required to do so. A president generally oversees the LLC's day-to-day operations.
They are responsible for making recommendations regarding hiring and firing employees, filing reports with state authorities, and generally managing the company on a daily basis.
Like managers, an LLC is not required to have a president; limited liability companies can choose to have multiple presidents or no president at all.
A company's operating agreement will determine how the LLC is managed and who holds managerial positions, including the president.
Do Llcs Have Directors?
LLCs are not required to have directors, so LLC members are sometimes called LLC managers. LLC members/managers may be referred to as officers of the LLC if they are running the LLC on a day-to-day basis.
LLC members are sometimes called LLC shareholders if they own shares of the LLC.
A company's operating agreement will determine whether or not LLC members will be called directors or have other titles, but being a director is generally an honorary title rather than a position with duties and responsibilities.
How to Add LLC Members?
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.
An LLC operating agreement will 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.
When LLCs add LLC members, they need to create a new LLC membership agreement that details the addition of these new LLC members and how they will be involved in company affairs.
A member of an LLC can be individuals, other LLCs, or foreign entities as long as the state allows it. It is better to visit a law firm and consult an attorney when adding a member to your LLC.
Related Articles:
- What Is an Executor of an LLC
- Who Can Be a Member of an LLC
- How to Remove a Member From Your LLC
- How Do You Fill Out an LLC Membership Certificate
What Is the Maximum Number of Members in an LLC?
The short answer is that 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.
In general, there is no limit to the amount of members an LLC may add or remove during its lifetime.
Liability of Members
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.
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.
Does an LLC Have Shareholders?
LLCs do not have shareholders in the traditional sense. A shareholder is a person who owns stock in a company.
An LLC's members are LLC owners, but they do not own a percentage of the company's assets or profits.
Is It Better to Be a Sole Proprietorship or LLC?
LLCs may be better off than sole proprietorships, but they come with some risks. LLCs are taxed more heavily than sole proprietorships if the LLC's taxable income is high; it's possible to end up paying a higher tax rate on your business income than you would as an individual.
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.
