What is the role of Capital Accounts in the LLC Operating Agreement?
The taxation of limited liability companies (“LLC”) cannot be understood without a rudimentary understanding of capital accounts. The term “Capital Account” appears many times in a typical LLC Operating Agreement and it is important that all LLC members understand its meaning. The total members’ equity in the LLC is expressed as the “capital accounts” of the members. Each member of a LLC has a separate capital account that represents the equity that member has in the LLC.
