How is ownership established in a limited liability company (LLC)?
Ownership in an LLC is usually structured in two ways: (1) by percentage interests or (2) by LLC membership units, which are similar to shares of stock in a corporation. In either case, ownership generally confers the right to vote and the right to share in the profits of the LLC. Although LLC membership units are like shares in a corporation, an LLC is different from a corporation in that an LLC can distribute its ownership interests as it pleases, without regard to how much money or property a Member contributes to the LLC. For example, if Dave contributes $10,000 of cash to an LLC but does not manage the business, and his partner John contributes only $1,000 but runs the LLC on a daily basis, Dave and John could decide to each have 50% of the membership units of the LLC. A limited liability company can also be organized with different classes of ownership interests, which provides flexibility for special allocations of profits and voting power.
