How to Add a Member to an LLC Company

By Terry Masters

A limited liability company, or LLC, is managed like a partnership rather than through a regulatory framework. It requires the consent of the partners, known as members, to accomplish anything. Members can execute an operating agreement to govern the procedure for making most decisions, but an operating agreement is optional in most states. Some states have default provisions in their Limited Liability Company Acts that dictate how certain situation are to be handled if an LLC hasn't formally adopted an operating agreement. The addition of new members falls under these default provisions.

A limited liability company, or LLC, is managed like a partnership rather than through a regulatory framework. It requires the consent of the partners, known as members, to accomplish anything. Members can execute an operating agreement to govern the procedure for making most decisions, but an operating agreement is optional in most states. Some states have default provisions in their Limited Liability Company Acts that dictate how certain situation are to be handled if an LLC hasn't formally adopted an operating agreement. The addition of new members falls under these default provisions.

Step 1

Draft and execute an operating agreement if the LLC doesn't already have one in place. Most states provide that the addition of a new member, when there is no operating agreement in effect to establish different rules, requires the consent of all existing members, and makes the new member an automatic equal partner in the company on the same level as the existing members. An operating agreement can change those rules, allowing, for example, for new members by a simple majority vote and for ownership interests that are less than equal to the interests of other owners, such as a 40-40-20 distribution.

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Step 2

Vote to add a new member. An LLC is operated by consent of its members, particularly in regard to adding new members. You cannot unilaterally force other partners to allow the dilution of their ownership interest by adding a new member -- the partners must explicitly agree. If you have an operating agreement, the vote must be in accordance with the agreement. If there is no operating agreement, the vote must comply with the state's LLC Act, which typically requires 100 percent consent.

Step 3

Collect the new member's capital contribution. Determine how much of an interest the new member will have in the company and how much the interest will cost to acquire. Every LLC member must have a capital account that represents that member's equity contribution to the company in the form of money, property or services. If there is no operating agreement, the new member is automatically accorded an equal share of the company as all other members, regardless of his capital contribution.

Step 4

Adjust company records. The company must keep accurate records of its members and each member's capital account. Amend the company's operating agreement to add the new member, and add the new member to all other company lists and records of ownership.

Step 5

Amend state filings, if needed. Some states require that an LLC's articles of organization list its members. Other states require an annual filing that lists the company's current members. Check your articles of organization and the state website to see if this applies in your state.

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Can an LLC Operating Agreement Be Amended?

The operating agreement of a limited liability company sets the guidelines and regulations for the company's business functions and structure. The agreement is typically prepared by the founding owner or owners, referred to as members, and kept by the LLC. An operating agreement is a legally binding document once signed by LLC's members, functioning as a contract. The agreement may be amended by the members if changes are needed.

How to Omit a Member of an LLC

Since business relationships don’t always work out as planned, it may become necessary to terminate certain relationships. In a limited liability company, or LLC, the owners, known as members, may change periodically. When one of those members wants to leave the LLC, doesn’t live up to his responsibilities or passes away, the other members may remove him from membership by following the LLC’s operating agreement.

How to Document Members in a Limited Liability Company

The owners of a limited liability company, or LLC, are known as members. Unlike a corporation, where ownership is represented by holding shares of stock, an LLC maintains a record of ownership through internal record keeping. Each member is allocated a capital account on the company's books that is the original amount of money, property and services a member contributed to capitalize his ownership interest, plus or minus any additions or withdrawals made to the account over time. An LLC has a legal duty to maintain an accurate accounting of members and each member's capital account for tax purposes.

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