Ownership Percentages

Ownership Percentages

LLC ownership can be expressed in two ways: (1) by percentage; and (2) by membership units, which are similar to shares of stock in a corporation. In either case, ownership confers the right to vote and the right to share in profits.

Unlike a corporation, an LLC can distribute its ownership interests as it pleases, without regard to how much money or property a member contributes to the company. For example, if Sam contributes $10,000 to the company and is a silent partner, and Rick contributes no money, but runs the company on a daily basis, they could still decide to split the membership interests 50%-50%.

An LLC can also be organized with different classes of ownership interests, which provide flexibility for special allocations of profits and voting power.

For example, you can create a special class of "super-voting" units that provide 10 votes per unit or pay a certain level of profit before the "regular" units.

The sale of membership interests is subject to federal and state securities laws. Generally, though, if you are not advertising the sale and are dealing only with a small number of investors (less than 35), then you will be exempt from most of the regulations. If, however, you are seeking to raise a significant amount of money from a large number of investors, you may want to consult an attorney.

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