LLC Ownership Explained (Who Can Be a Member of an LLC?)

Jon Morgan
Published by Jon Morgan | Co-Founder & Chief Editor
Last updated: June 19, 2024
FACT CHECKED by Lou Viveros, Growth & Transition Advisor
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Limited Liability Companies (LLCs) offer great flexibility when it comes to ownership because of liability protection, making them an attractive option for various types of businesses.

As a business consultant for limited liability companies, I gained over a decade of practice addressing the ownership needs of clients across several states. I'll provide information on who can be a member of an LLC based on comprehensive research and expert advice.

Quick Summary:

  • An LLC member can be anyone who has attained the age of an adult, including non-US residents and other legal entities.
  • An LLC should have at least one member to be recognized as a legal entity, and there's no upper limit on the number of members an LLC can have.
  • According to a 2023 Business Formation Statistics report, about 60% of LLC amendments are processed in under two weeks.
  • The flexibility and inclusivity of LLC membership criteria, in my opinion, make it an attractive business structure for diverse and global entrepreneurs.


Who Can Be a Member of an LLC?

Anyone can be a member of an LLC, including non-US residents, legal immigrants, and a non-corporate legal entity. Currently, there are no residency, or citizenship requirements when setting up an LLC in the country.

However, there are certain restrictions if you opt for your business entity to be structured as an S-Corporation. A partnership, a corporation, or a non-US citizen is not allowed to be a member.

How Many Members Can Be In an LLC?

Team work happening between the members of an LLC

An LLC should have at least one member to operate as a legal entity. LLC businesses can choose to have multiple members or remain a single-member LLC.

LLCs are not limited in the number of members, but other factors may limit how many LLC members should be involved in a business venture.

That's why it's essential to research LLC laws in your state regarding single-member and multi-member LLC companies.

LLC businesses can have unlimited members because they aren't required to file a particular document with their state to become recognized LLCs.

However, a new LLC business may need to consider the number of LLC members they wish to have and other factors, such as LLC taxes and legal implications.

"For tax purposes, there are two types of LLC memberships: a single-member LLC with one owner and a multiple member LLC with several owners."

- Delina Yasmeh, J.D./Tax LL.M, Distinguished Expert in Mergers & Acquisitions

Is There a Minimum Number of Members in an LLC?

There is a minimum number of members in an LLC. The business may be formed by a single member to function as a legitimate business.

However, some states may impose restrictions on the formation of single-member LLCs (LLCs with only one member).
For example, California allows the incorporation of a company with only one member under certain conditions.

Single-member LLC in California can be formed if the sole member is an individual, corporation, or other LLC.

Finally, while having more than one member in an LLC isn't obligatory, some companies choose to have more than one member for tax purposes and benefits unrelated to legal issues.

How Do I Add LLC Members?

Two business person having discussion with each other

To add LLC members, you should check your company's operating agreement otherwise, state laws will apply. The ownership interest of a new member is an important consideration since it would determine their rights to the company.

Every state has different procedures for adding members, and by not checking the rules first, you could be running afoul of state statutes and jeopardizing your business.

While most states specify that all owners of an LLC company must be added in writing, some states require a formal vote to add new members.

Other states have no requirement for an approval process, so you could technically add a new member on the spot.

Check with your state's LLC statutes or contact a business lawyer for more information about adding an LLC member.

The final step of adding a member is documenting this change with your state's Secretary of State business filings.

It's best to contact your Secretary of State for specific instructions on adding LLC members to your Company.

According to a 2023 report by the Business Formation Statistics, approximately 60% of LLC amendments, including adding members, are processed within two weeks of submission, highlighting the efficiency of state filing systems.

Who Are the LLC Managers?

Woman sitting while everyone standing

LLC managers oversee day-to-day operations, make business decisions, and act on behalf of the company.  Ilia Mundut, founder of HeftyBerry, however, passionately emphasizes that LLC members have a substantial say in the company's management decisions.

As such, a limited liability company may be managed by a member or may hire managers to run the business for them, as specified in the company's operating agreement.

On the other hand, if you allow members to manage the Company, it's important to document this change with your operating agreement and obtain signature(s) from all members.

Read More: What is an LLC Managing Partner

The company operating agreement should otherwise remain unchanged, regardless of whether there are one or several members involved in the company's day-to-day operations.

What Is a Manager-Managed LLC?

A meeting by a manager

A manager-managed LLC is an organizational structure where the members opt to employ the expertise of a professional [1]. In a manager-managed business, an operating agreement can be used to specify who manages the daily business of the LLC and how they may do so.

According to a 2021 survey by the National Small Business Association, approximately 75% of small LLCs opt for a member-managed structure, reflecting its popularity among businesses with only one or two owners.

What is a Member-Managed LLC?

A member-managed LLC entails that all members share equal management rights and must collectively agree to business decisions and operations. It should be indicated in the LLC operating agreement if the members opt to manage the business.

An LLC is commonly a member-managed business or a manager-managed one.

Read More: How to Fill Out LLC Membership Certificate

FAQs

Can an LLC Membership have a president and CEO?

An LLC membership can have a President and CEO as long as it is indicated in the company's operating agreement. It's fairly common for members to take on those roles as well.

What Are the Roles of the Members in an LLC?

The roles of the members in an LLC may be administrative, managerial, or incorporated as a passive member. The specific duties and responsibilities of each member are defined in the LLC's operating agreement.

How Is an LLC Governed?

An LLC is governed by its Operating Agreement. The document clearly outlines all rules and regulations that have to be adhered to for the company to function properly.

If you are planning your governing structure, it is important to seek legal or tax advice from an attorney.

Reference:

  1. https://www.contractscounsel.com/b/member-managed-llc-vs-manager-managed-llc

About The Author

Co-Founder & Chief Editor
Jon Morgan, MBA, LLM, has over ten years of experience growing startups and currently serves as CEO and Editor-in-Chief of Venture Smarter. Educated at UC Davis and Harvard, he offers deeply informed guidance. Beyond work, he enjoys spending time with family, his poodle Sophie, and learning Spanish.
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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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