Key Takeaways

  • An LLC can have any number of owners, known as members, and most states do not impose a maximum.
  • LLCs can be structured as single-member or multi-member, with different tax treatment and management styles.
  • Members may be individuals, corporations, partnerships, trusts, or even other LLCs.
  • Married couples can own an LLC together; treatment as single- or multi-member depends on state law and federal tax rules.
  • Ownership rights and responsibilities should be clearly outlined in an operating agreement to avoid disputes.
  • Unlike corporations, LLCs cannot sell stock to the public, but they can admit new members with existing members’ approval.

LLC number of owners depends on the ownership of the LLC. It may be owned by an individual, other LLCs, corporations, partnerships, or any other legal entity recognized by the state's local laws.

Business Structures

One of the first decisions a new business owner must make is deciding on the type of entity structure to use to form the company. This is usually a choice between a corporation or LLC. Each has their own process of formation and operating structure.

LLC Ownership Flexibility

An LLC offers unmatched flexibility in ownership compared to other business structures. While corporations divide ownership through shares of stock, an LLC’s ownership is expressed in membership interests. These interests can be split equally among members or divided based on each person’s financial contribution, role, or another arrangement outlined in the operating agreement.

Members can include:

  • Individuals (U.S. citizens or non-citizens, depending on state law)
  • Corporations
  • Partnerships
  • Trusts
  • Other LLCs

Because there is no statutory cap on the LLC number of owners, businesses can expand membership as needed, provided at least one member is always maintained.

Corporation

Each owner in a corporation owns shares of stock. Owners are referred to as shareholders. A shareholder's portion of the corporation's ownership is measured by the number of shares owned.

Shareholders are responsible for electing a board of directors whose job is managing the company. A shareholder may be elected to the board but there is no requirement that a shareholder holds the position. In some states, a board of directors may consist of only one director. In other states, the requirement is there must be more than one director.

The board of directors makes all major decisions via a vote pertaining to the company. The decisions are then documented as formal resolutions, which requires taking meeting minutes.

The board also delegates the responsibilities of day-to-day management to officers of the corporation who carry out the decisions made by the board. There is no requirement that an officer must be a shareholder or a director to hold the position of officer. This means officers, shareholders, and directors can be different people although there may be some overlap.

Corporations are governed by a Certificate of Incorporation, which is also referred to as Articles of Incorporation or Charter, and a set of bylaws that define the procedures for voting and the election of the board of directors. In a corporation, there can be one or more shareholder agreements. This clarifies the rights that shareholders have among themselves, including:

  • Options.
  • Rights of refusal.
  • Restriction of transfers.

Also, corporations are usually required to hold an annual meeting of the board and/or shareholders regardless of whether there is any significant business to be discussed. In summary, corporations are governed in a more structured and formal process.

This may be beneficial in some situations since the company consists of a significant number of owners involved in its operation and structure provides a better decision-making process. A disadvantage of the corporate structure is the many formalities involved that may be too much for a small business that has only a few owners or just one owner.

Single-Member vs. Multi-Member LLCs

LLCs can be structured with one or multiple owners.

  • Single-Member LLC (SMLLC): Owned by a single person or entity. For tax purposes, the IRS treats it as a “disregarded entity,” meaning profits and losses flow directly to the owner’s personal tax return unless the owner elects corporate taxation.
  • Multi-Member LLC: Owned by two or more members. By default, the IRS taxes this structure as a partnership, requiring the filing of Form 1065 and Schedule K-1s to allocate profits and losses to members.

The choice between single-member and multi-member affects not only taxation but also management. Multi-member LLCs often need clearer governance procedures, especially when voting or profit distribution arrangements differ among owners.

Limited Liability Company

To form a company with a single owner, a limited liability company (LLC) is the easiest organization to manage. LLCs can be formed with any number of members. Single-member LLCs may be owned by other LLCs, creating a multilayered company. This is a strategy used in industries such as:

  • Pharmaceutical.
  • Branded retail products.
  • Real estate.

While there are no restrictions on the number of members you can have with an LLC, this is not the case with other structures. For example, limited liability partnerships (LLPs) must have more than one partner. S corporation cannot exceed 100 owners, and a sole proprietorship is limited to one owner.

A limited liability company is formed by filing its articles of organization with the applicable secretary of state where the business is initially headquartered. An LLC may be managed by its members similar to the way a partnership is managed. This business structure is referred to as member-managed where the members approve major decisions.

An LLC can also be manager-managed. The members do not manage the company but elect one or more managers who have the authority to make decisions. A third option is board-managed, which is where members elect a board of directors who manage the company, much like that of a corporation.

A general misconception of LLC ownership is that the company can sell stock on the open market. This is not the case. LLCs are not legally authorized to sell ownership interests to the general public. Unless the articles of organization specify that adding new members or owners is prohibited, LLC members can vote to add an owner or owners.

There are no states laws established that legally state there is a maximum number of owners or members an LLC can possess. An LLC does have to maintain at least one member or owner at all times.

Importance of the Operating Agreement

Regardless of the LLC number of owners, a written operating agreement is essential. This internal document defines each member’s ownership percentage, voting power, profit-sharing arrangements, and rules for admitting new members.

Without an operating agreement, state default laws apply, which may not reflect the owners’ intentions. For multi-member LLCs, especially those with unequal contributions or varied management roles, an operating agreement provides clarity and reduces the risk of disputes.

Spouses and Family-Owned LLCs

Many small businesses are owned jointly by married couples. In community property states, the IRS allows spouses to treat their LLC either as a single-member LLC (disregarded entity) or as a multi-member LLC taxed as a partnership. This flexibility can simplify tax reporting while preserving liability protection.

Family-owned LLCs can also include children, parents, or other relatives as members. This structure is often used for estate planning, succession, or holding family-owned real estate investments.

Frequently Asked Questions

  1. Is there a limit to how many owners an LLC can have?
    No. Most states do not limit the number of members an LLC can have, but at least one owner is required.
  2. Can an LLC have just one owner?
    Yes. A single-member LLC is common for entrepreneurs who want liability protection without forming a corporation.
  3. Can a married couple own an LLC together?
    Yes. In community property states, they may elect to be taxed as a single-member LLC or a multi-member LLC.
  4. Who can be an owner of an LLC?
    Members can be individuals, corporations, partnerships, trusts, or other LLCs, depending on state law.
  5. Why is an operating agreement important for LLC owners?
    It outlines ownership percentages, voting rights, profit distribution, and procedures for adding members, reducing the risk of conflicts.

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