A Limited Liability Company (LLC) is a great business model for startup businesses because it provides the opportunity to customize business ownership to meet certain requirements, such as conditions placed by the owner(s).
Keep reading to learn about the fundamentals of LLC ownership.
The Fundamentals
The owner(s) of an LLC is typically referred to as a member. Thus, an LLC possessed by an individual or a single business entity is referred to as a single-member LLC. On the other hand, an LLC possessed by more than one person or entity is referred to as a multi-member LLC. Overall, an LLC can have an unlimited number of members.
After ownership is determined, the membership interests are typically expressed via percentage or membership units (like corporate shares). It is important to note that the terms selected should align with your business goals. For example, if the business will be mainly owned by your family, then determining membership interest via percentage is less complicated and more apparent.
If you need financial support from others who are not family, however, determining membership interest via membership units can promote a more effortless transfer of ownership rights.
Implementation of Ownership Rights
To be an LLC member, several forms of contribution are required, such as:
- Money
- Owned properties
- Services
Additionally, the concomitant rights, including the distributions, can be customized each time an LLC member makes a capital contribution. In the case that one member contributes 40% of the capital, for example, that member and the rest of the members will continue to receive a 50-50 profit.
Overall, all LLC members share the same rights as dictated by standard state laws, including:
- Sharing the revenue (as well as company cutbacks).
- Casting a vote about important LLC concerns.
- Reviewing the books.
- Benefitting from various rights.
Although these rights originate from Florida law, they may get modified via a contractual agreement, known as an operating agreement. In other words, an operating agreement often regulates the ownership rights of an LLC, and may include the following:
- Dispensing earnings and losses in a manner that does not match with the memberās capital contributions.
- Assigning member meetings.
- Developing different types of ownership to indicate passive investor rights.
Transfer of Membership Interests
A transfer of membership units can occur due to a death, incapability, or sale. If the membership units are being transferred to many investors, however, you should ensure that your interest is secure within the federal securities law.
In the case that you offer investors an interest that does not exceed 35, your interest will likely qualify for an exemption of the federal disclosure requirements and certain state securities laws.
Supervision
The members of an LLC can be supervised by:
- Fellow LLC members, known as a member-managed LLC.
- Several members assigned as managers, known as a manager-managed LLC.
- Non-owners.
The responsibilities of members and managers should be determined and clearly expressed to avoid ineffective management.
Payment
The members of an LLC can pay themselves through different options, such as:
- Profits.
- Periodic payments based on the yearly estimated earnings.
- Periodic payments as employees of the company.
Do You Want to Form an LLC? We Can Help You
If you are interested in forming an LLC, you need the guidance and assistance of qualified and experienced business attorneys.
At Jurado & Associates, P.A., we have the knowledge and expertise to help you make the best decisions for your business. Contact us today by phone at (305) 921-0976, by email at [email protected], or WhatsApp atĀ +1 (305) 921-0976.
