LLC Members With Uneven Ownership

Two piggy banks, one full with money and the other empty and hungryDespite what the graphic may imply, uneven ownership in an LLC does not necessarily mean an unfair distribution; there may be a number of reasons LLC members may decide to own an unequal share in the company. For instance, some members may have contributed more capital to the LLC and therefore demand a larger ownership interest, or a member may be a silent partner and wish to contribute only a small amount to the company in exchange for a small share. Regardless of the reason, the LLC ownership structure is flexible enough to allow for any distribution of ownership among the members.

You do not need to specify the ownership structure in your LLC’s Articles of Formation, though some states may require you to list all members. However, the distribution of shares should be clearly described in the Operating Agreement or in a separate document — usually a profit sharing agreement or profit share contract — that has been incorporated into the Operating Agreement. Unlike other business entities like corporations and partnerships, the ownership interest in an LLC does not have to directly relate to the member’s contribution to the LLC. Uneven ownership is possible even when members have contributed evenly, and equal ownership is possible even when the members have contributed unequally.

You may want to give ownership interest commiserate with the member’s investment in most cases, but you may distribute ownership in any way that you and your partners, fellow members, or board of managers agree.