An important part of forming an LLC is understanding how ownership of the company works. One common question is, “How many owners can an LLC have?” This article will answer that question and provide a brief overview of LLC membership in general.
What is an LLC Member?
An LLC member is an owner of that LLC. Typically, each member of an LLC has made a capital contribution of some kind to secure a stake in the business. This can be anything from start-up funds to physical assets like office space or equipment. All LLC members have an interest in the business no matter their role. This affords them the right to a portion of business profits, voting rights, and a number of other rights as outlined in the company’s operating agreement.
How Many Members Can There Be?
A standard LLC has no upper limit when it comes to the number of members the business can have. The only exception is for those LLCs that choose to be taxed as S corporations. This designation carries a 100 member limit.
What is the Minimum Amount of Members?
A business must have at least one member to register as an LLC. This is called a single-member LLC.
Who Can and Cannot Be an LLC Member?
LLCs are extremely flexible entities, and there are very few restrictions when it comes to membership. Some states do not allow minors to organize LLCs, but minors can be members in most states. Individuals, corporations, and other LLCs are permitted to be LLC members, and there are no citizenship or residency requirements.
Again, an exception exists for LLCs electing S corporation status when filing taxes. If you choose this distinction, corporations, partnerships, non-resident aliens, and some financial institutions are not permitted to be members of your LLC.
How are LLC Members Paid?
An LLC owner’s income depends on two factors:
- Whether the LLC is a single-member or multi-member LLC
- Whether the LLC is taxed as a default LLC, a C corp, or an S corp
In general, LLCs with a default tax status pay their owners in distributions, while LLCs with a C corp or S corp tax status pay their owners “reasonable salaries.” Multi-member LLCs should consult their operating agreement for details on each partner’s share.
For more information about paying yourself in an LLC, check out our guide.