1. Registering an LLC for Multiple Members
2. Some Requirements
3. Single-Member vs. Multiple-Member LLC
4. The Downside of LLCs

LLC multiple owners are a group of people who are entitled to share in the profits and losses of their limited liability company. They're also referred to as members of the LLC.

Registering an LLC for Multiple Members

An LLC is a limited liability company that has the advantage of being a pass-through entity and can change its status to that of a corporation for tax purposes. State laws generally allow the registration of LLCs with several members. To create an LLC owned by many people, the intended owners of the LLC are required to file articles of organization with any state agency in charge of registering such business entities.

The best option for people who are part of a small group planning to start a small company that will do business in one state is to start an LLC in that state. However, some states like Nevada, Delaware, and Wyoming offer business-conducive environments where businesses don't bother with unwelcome taxes. If you register your business in any of the business-supporting states but wish to do business in some other state, you have to register in the second state as a foreign LLC and run all registration and yearly business expenses in more than one state.

Some Requirements

To start an LLC, the intended owners of the LLC will have to provide the necessary information to the government of their chosen state. Information requirements vary from state to state. However, the following are some of the typical requirements:

  • An operating agreement, which would be a binding document by which the LLC would be run.
  • The name and address of a registered agent who'll stand for the LLC in the event of a lawsuit.
  • The name and address of the LLC. 
  • The names and addresses of the people forming the LLC.

A documented operating agreement isn't compulsorily required, but without one, the LLC will be run by the default state laws, which might or might not suit the plans of the LLC members. Filing Articles of Organization is another important requirement for starting an LLC. The body in charge of registering business entities may receive it via fax, mail, or the internet. The cost of creating an LLC is between $50 and $300.

Single-Member vs. Multiple-Member LLC

If what you're looking to start is a single-member LLC, the IRS will treat it as a “disregarded entity,” making you provide all your revenue information on a Schedule C tax form, which you'll turn in with a personal 1040 form.

If you're in the business of rendering services or are into product sales, you'll pay self-employment taxes covering all your profits via Schedule SE, which is short for “Self-Employment Tax.” On the other hand, if your company is into a passive trade such as rentals, you'll not be required to pay self-employment taxes. Instead, you'll report your revenue through Schedule E (“Supplemental Income and Loss”).

An LLC with many members, like an LLC with one member, doesn't pay taxes. Instead, each LLC member pays taxes on their share of the LLC's proceeds. Even an LLC with many members, which doesn't pay taxes, is required to file a Form 1065, or “U.S. Return of Partnership Income,” a document used to relate information that the IRS can verify. Each LLC owner is required to attach their Schedule K-1 to their Form 1040 for the documentation of the IRS.

Taxes are easier for single-owner LLCs to handle than for LLCs with many members because one-member LLCs aren't required to pay federal taxes unless the owner decides that their company will be seen as a corporation for tax reasons. LLCs are flexible to operate because they allow their members to determine how to distribute profits without taking percentages of ownership into account.

The Downside of LLCs

LLCs that pay taxes as partnerships usually make provisions in their operating agreements stating when and how cash will be allocated to the members to pay taxes that will be owed on the organization's income. This can make things difficult for the LLC to reinvest its money for business growth. LLCs can be handsomely profitable if handled professionally. However, with all the details and processes involved, it can seem a bit overwhelming to start or to proceed when stuck.

Therefore, if you need help with starting or finishing the process of creating an LLC with multiple owners, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.