September 16, 2016

LLC Adding Partners Or Selling Stock?

I am looking to start an LLC with one partner. We will have to hire a CEO soon, as I do marketing and he does programming.

Does an LLC allow you to offer shares to a new partner?

I do not want to start an LLC and then have to incorporate immediately.
Thanks

Answer

Yes, you can buy and sell membership interests in a limited liability company. These are generally equivalent to owning “shares” in a corporation. However, the Operating Agreement will specify particularly what powers a member has with respect to those shares and how taxes are allocated.

What that means is that you can write the rules for your LLC that makes membership units as easily transferable as in a corporation. On the other hand, you can tighten up the rules such that existing members have to approve new members, have the right of first refusal if a member wants to sell his/her units, prevent creditors that take membership units involuntarily from exercising decision making control, and so forth.

At a minimum, you will want written evidence that the shares were issued and money paid (or services rendered) in exchange for the membership units.

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