Key Takeaways

  • An LLC (limited liability company) must have at least one member but can generally have an unlimited number of members unless state law provides otherwise.
  • Members can be individuals, corporations, other LLCs, or even foreign entities, and they do not need to reside in the state where the LLC is formed.
  • The flexibility of LLC ownership allows different types of contributions (cash, property, services) and customizable ownership percentages based on agreements among members.
  • The structure and number of members can affect how the LLC is taxed (single-member vs. multi-member) and how decisions are made.
  • Special rules may apply for foreign owners, minors, or entities like S corporations that place restrictions on ownership.

How many owners can an LLC have? A Limited Liability Company is usually required to have at least one member, but can have as many as they desire beyond that.

Forming an LLC

First, business owners need to choose a name for their LLC and file articles of organization with the Secretary of State in the state in which they plan to conduct business.

Articles of organization include the following information about your business:

  • Names of LLC owners (also called members)
  • Business address
  • Registered agent name and address

You can find a form to fill out for your articles of organization (or formation documents) on the Secretary of State website or their division for businesses and corporations.

Operating agreements are also required by some states. Even if your particular state does not require your LLC to file an operating agreement, it's still a good idea to do so in order to ensure that all of the LLC's members are on the same page. Operating agreements spell out the rights, responsibilities, and ownership percentages of each of the members.

It's a good idea to check with a business lawyer to learn more about the advantages of an LLC to see if this business structure is the right fit for your company. You can find out the cost of an LLC versus a corporation and the process for startup. Some states make the process of forming an LLC very quick and simple.

Sometimes business owners will choose a certain business structure when starting their company, but their needs will change over time. It can be beneficial to regularly assess your business needs and see if you might need to change the structure. Changes in the number of owners that your business has could cause you to need to change your entity type.

Some states don't allow single-member LLCs, so if you only have one owner, you might not be able to form an LLC. Frequently, business owners will add their spouse as a second owner in order to be able to maintain their chosen structure. This additional member can remain nominally involved in the business so they don't have to file any additional tax forms or worry about liability.

Who Can Be an LLC Member

LLC ownership is highly flexible compared to other business structures. In most states, there are no restrictions on who can be a member of an LLC. Members can include:

  • Individuals – U.S. citizens, permanent residents, or even foreign nationals.
  • Business Entities – Other LLCs, corporations, partnerships, or trusts.
  • Foreign Entities – Businesses formed outside the U.S. can own an interest in a domestic LLC.

This flexibility is one of the key reasons entrepreneurs choose the LLC structure. State laws rarely limit the number or type of members, but a few states may impose additional requirements on foreign owners or entities engaged in regulated industries (e.g., healthcare, banking, or law).

While most states allow minors to be LLC members, legal guardians usually need to act on their behalf in matters like signing contracts. It’s also important to note that S corporations cannot be members of an LLC if they want to maintain their S corporation status, as IRS rules restrict ownership to individuals and certain trusts.

Single Member or Multiple Member LLCs

When choosing the type of LLC you wish to form, the number of business owners isn't the only thing to consider. Even though the choices are single-member or multi-member LLCs, they differ in more than just how many members there are.

Single-member LLCs can be easier when it comes to taxation because only one person needs to report the company income. Multi-member LLCs might pass the business income through to each of the members causing them to all need to report. Each member will receive a Schedule K-1 form that documents how much of the company profits or losses they took on in the year. This number should be reflected on a Form 1040 Schedule C.

Some business owners might find the multi-member setup more appealing because it can help the company keep running in the event of the death of a member. Major events like member deaths, disputes, and ownership changes should be clearly outlined in the LLC's operating agreement.

How the Number of Members Impacts Structure and Taxes

Understanding how many members an LLC can have also means understanding how membership affects the company’s structure and tax treatment.

  • Single-Member LLCs (SMLLCs): These are treated as “disregarded entities” by the IRS. Profits and losses flow directly to the sole owner’s personal tax return.
  • Multi-Member LLCs: These are treated as partnerships by default. Each member receives a Schedule K-1 reflecting their share of profits and losses.

While there’s no maximum number of members in an LLC, adding more members can influence decision-making processes. Larger LLCs may want to establish a manager-managed structure to streamline operations and delegate authority. This is particularly useful when there are passive investors who don’t participate in daily management.

Some states require additional filings if the LLC exceeds a certain number of members or if ownership interests change significantly. These details should be reflected in the operating agreement to prevent disputes over profit allocation, voting rights, and buyout terms.

Ownership Percentages

Ownership in an LLC can be classified by a percentage of ownership or membership units. Membership units are like the stock shares of a corporation. Whether the owners have an ownership percentage or a membership unit, this will determine their voting rights and profit shares.

LLCs have the freedom to hand out ownership percentages however they see fit. Corporations do not offer this kind of flexibility but must give percentages that reflect each stock holder's capital contribution. LLC's can award a member a higher percentage for taking on additional management responsibilities even if their capital contribution was less than others.

LLCs can also offer different levels of ownership to allow more voting power and profit percentages to certain members over others. A higher level of ownership could award a member five votes per unit more than a base level that just awards one.

Membership interests sales should be laid out in the operating agreement, but are also subject to states and federal laws.

Membership Contributions and Classes

Members don’t have to contribute equally or even contribute cash. Ownership interests can be based on different types of contributions, such as:

  • Capital Contributions: Cash or property invested in the LLC.
  • Services: Work or expertise provided to the business.
  • Intellectual Property: Rights or assets contributed to the company.

LLCs can also create different membership classes—for example, voting and non-voting members, or preferred and common members. This flexibility allows businesses to attract investors or reward founding members differently while maintaining control.

The operating agreement should clearly define how contributions translate into ownership percentages, how new members are admitted, and the procedures for transferring or selling membership interests. Clear guidelines are especially important as the LLC grows and brings on more members.

Frequently Asked Questions

  1. How many members can an LLC have?
    There is no legal maximum. An LLC must have at least one member but can have hundreds or even thousands of members, depending on the business’s structure and state laws.
  2. Can a corporation or another LLC be a member?
    Yes. Corporations, LLCs, partnerships, and even foreign entities can own membership interests in an LLC, making the structure very flexible.
  3. Are there any restrictions on who can be a member?
    Most states allow individuals, companies, and foreign entities to be members. However, S corporations cannot be members without risking their tax status, and minors may need representation.
  4. Does the number of members affect taxes?
    Yes. A single-member LLC is taxed as a sole proprietorship (or a disregarded entity), while a multi-member LLC is taxed as a partnership by default. Members can also elect corporate taxation.
  5. Can LLC members have different rights or profit shares?
    Absolutely. Ownership can be divided based on capital contributions, services, or other terms defined in the operating agreement. LLCs can also create different membership classes with varying rights and privileges.

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