How to Add Capital Contributions to an LLC

By David Carnes

An LLC, or limited liability company, is a business vehicle structured as a hybrid between a partnership and a corporation. State LLC laws are designed to meet the needs of small businesses by allowing LLCs to operate with considerably more flexibility than a corporation. LLCs obtain the money they need to operate through capital contributions.

LLC Structure

Compared to a corporation, an LLC enjoys reduced legal formalities and a more flexible management structure. You can form an LLC by filing Articles of Organization with your state government and paying a filing fee. Once the LLC is formed, it is treated as a legally independent business entity; its owners, known as members, enjoy limited liability. The ownership percentage of each member is determined by the amount of capital he contributes, unless the LLC has adopted an operating agreement that states otherwise.

Capital Contributions

A member makes a capital contribution to the LLC when he transfers money, property or services. The capital contribution then becomes the property of the LLC. A member who adds capital to an LLC buys an ownership stake, which normally entitles him to a proportionate share of LLC profits and voting rights. Members make capital contributions when the LLC is first formed and at any time during the LLC’s lifetime, as long as all members agree.

Ready to start your LLC? Start an LLC Online Now

Member Capital Accounts

Individual capital accounts are created to receive contributions to the LLC from each member. The capital account reflects how much money the member would receive if the LLC dissolved, liquidated its assets, paid its debts and distributed remaining proceeds to each member in proportion to his ownership percentages. The balance in each member’s capital account initially equals the value of his first capital contribution. This balance can be adjusted up or down even with no further capital contributions if the LLC takes on debt, its property appreciates or depreciates, or its cash earns interest.


Making a capital contribution to an LLC is usually a fairly simple matter. The member transfers money or property to the LLC by transferring money into the LLC’s bank account, for example, or by transferring title to property to the LLC. The contribution is recorded by crediting the member’s capital account by the amount of the contribution. The member’s cash account -- the account created to allow the member to receive distributions of profit from the LLC -- is then debited by the same amount. Contributions of property must be appropriately valued before adjusting accounts to help avoid occasional complications.

Ready to start your LLC? Start an LLC Online Now
How to Use an LLC for Vehicle Ownership


Related articles

Incorporating Vs. LLC

One of the most important initial decisions in starting a business involves deciding what type of business entity your new venture should be. Two options are corporations and limited liability companies, or LLCs. There are distinct advantages and disadvantages to each type with respect to personal control, taxation and personal liability.

Can I Have a Partner With an LLC?

A Limited Liability Company is a common business entity that may be owned and managed by one or more individuals. LLCs, formed and managed under state law, are relatively simple to set up, and allow for a flexible management structure. Unlike a partnership, LLC owners, known as members, are not personally liable for the debts and obligations of the company.

How to Transfer Ownership of an LLC to a Corporation

Limited liability companies and corporations are both governed by state law. LLCs have members who own the company and corporations have shareholder owners. If you are a member of an LLC, you might be able to transfer your ownership interest in the LLC to a corporation. It depends on your state, the provisions of your LLC agreement, and the purpose of the limited liability company.

LLCs, Corporations, Patents, Attorney Help LLCs

Related articles

Can You Form a LLC With Your Multi-family Property?

Starting a business is an exciting undertaking. There are many things to consider when creating a new business, ...

Advantages of Forming an LLC in Nevada

A limited liability company (LLC) is a form of business organization that offers limited liability and no double ...

What Can You Transfer Into Your LLC?

State law gives a limited liability company the power to own property in its own name. This includes real property, ...

How to Add a Partner to a LLC Using Sweat Equity

The existing members of a LLC have great flexibility to establish the procedures for the admittance of new members. As ...

Browse by category
Ready to Begin? GET STARTED