How Many Members Can An LLC Have: Everything You Need to Know
If you're wondering how many members can an LLC have, a limited liability company (LLC) can have one or more members, but most states require at least one member for an LLC to be formed.3 min read
If you're wondering how many members can an LLC have, a limited liability company (LLC) can have one or more members, but most states require at least one member for an LLC to be formed. States do not, however, enforce any limitations on the number of members an LLC can have. A limited liability company that operates with only one member is called a single-member LLC, and a company with more than one member is called a multi-member LLC. Limited liability companies that are taxed as S corporations and cannot contain more than 100 shareholders carry a special status.
Who Can Be an LLC Member?
Almost any type of organization can become an LLC member, including all C and S corporations, other LLCs, trusts, and pension plans. Although it is rare for an LLC to have thousands of members, it is legal. An LLC member is at the same time the owner of that LLC. And the only difference between a single member LLC and a multiple-member LLC is the way these two entities are subjected to taxes. Every LLC performs under specific conditions, but each state has its own requirements for all LLC members.
Any company or person who is 18 or older is legally allowed to be part of an LLC. Holding companies can also own LLCs. In some states, LLC members must be identified, while in other states they do not.
Regardless of the state, one or multiple LLCs can own another LLC. Also, one or multiple companies in any state can own an LLC. Additionally, it does not matter to what type of company or legal business entity they belong.
What Is an LLC Member?
A single member of an LLC is in charge of all important aspects of that LLC. This includes filing the articles of incorporation that are under particular rules of the state where the LLC is located.
Each state has its own custom form that must be filled out by the owners while they are forming an LLC. If the state requires at least two owners to form an LLC, the most convenient way to do this is to involve a partner/spouse or perhaps a reliable family member as a second owner.
In this scenario, the second member of the LLC would not be held liable or be in charge of the state tax obligations. If you are missing an additional member to form an LLC, it might make more sense to form a corporation instead.
Despite the fact that your state demands specific legal requirements, you can file for an LLC in states, such as Delaware or California, that require only one member/owner. Single member LLCs are usually not allowed to operate within the states that do not allow their formation.
Can a Minor Be an LLC Member?
In most states, a minor can be an LLC member. However, do your due diligence first to find out if your state is one that does not allow minors to be LLC owners. This topic is still an unexplored area that requires more research, so it might be a good idea to consult with an attorney about it.
Who Can't Be an LLC Member?
Company shareholders cannot be part of an LLC if that LLC has S corporation tax status with the IRS. The following are not permitted to be LLC members of S corps:
- Nonresident aliens
- Certain financial institutions, insurance companies, and domestic international sales corporations
Number of Members and Asset Protection
The best asset protection against creditors is to form an LLC with two or more members. In many states, the law allows creditors of a single member LLC to flee a "charging order," or a lien on a member's LLC interest.
Outgrowing Your Business Structure
Over time, if the company grows and an LLC stops being a suitable business form, owners can convert that LLC into a corporation.
If a small LLC eventually becomes so large that it no longer fits the LLC form, its owners can relocate its assets into a new corporation maintaining the same ownership rights.
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