A key benefit of limited liability companies is that the owners (or “members”) receive limited liability; that is, they can usually not be held personally liable for the debts of the LLC. In addition, if the LLC is sued, the owners’ personal assets are not subject to collection.
However, there are some instances when — as lawyers say — the veil of limited liability is pierced and the LLC members can be personally liable for the debts of the LLC.
A decision you must make when starting a limited liability company is whether your LLC will be member-managed or manager-managed. Though you may change your mind later, it is better to think about your preferred structure at formation rather than needing to amend your filings. Whether you start an LLC as member-managed or manager-managed depends on what level of authority you want your members to have in the business.
Though not all states require an operating agreement and none require you to file it, this document may be the most important one for your limited liability company. The operating agreement governs the relationships among each of the LLC’s members. Even in a partnership between good friends, an LLC should have a detailed operating agreement in the event of unforeseen disputes.
Adding a member to an LLC is straightforward, but there are slightly different considerations when you add a new member to a single-member LLC. You will not need to re-register your LLC with the state, but you may have to file an amended Articles of Organization.
Though not required, you should also amend your Operating Agreement to clarify the relationship you have with your new partner. Due to the flexibility of the LLC structure, your new partner may invest any amount of time or money into the LLC and receive any share of the LLC you two deem agreeable.
While corporation owners are called “shareholders”, LLC owners are called “members”. Both a shareholder and a member own a piece of the corporation or LLC. Typical corporations will have three levels of governance: the shareholders who own the corporation, the Board of Directors who oversees the corporation’s activities and make decisions in the best interests of the shareholders, and the administrative staff who operates the day-to-day activities of the corporation.