Can an LLC have Membership Interests with different economic rights?
A special feature of an LLC is that the members can agree to share profits and losses in proportions different from their membership interests. In other words, the members could agree that 100% of the profits of the LLC are to be distributed to one member for the first three years, despite the fact that that member owns only 50% of the LLC and normally should have received only 50% of the profits and losses. But these so called “special allocations” have to follow quite complicated tax rules to make them permissible. This adds a layer of complexity and extra cost to the management and accounting for the LLC.
