How to Add a Member to an LLC

By Jeff Franco J.D./M.A./M.B.A.

How new members are added to a limited liability company, or LLC, is determined by the LLC's operating agreement provided it has one. However, each state has its own laws for areas where the operating agreement is silent or there is no operating agreement. While the laws vary, most states have adopted the Revised Uniform Limited Liability Company Act in its entirety, or with only minor modifications.

Step 1

Review a copy of the LLC operating agreement to determine the procedures for admitting new members, such as the number of member votes necessary. If the operating agreement provides no instruction,new members cannot be admitted unless all current members consent.

Step 2

Take a member vote on admitting the member. Only when there are a sufficient number of votes pursuant to the operating agreement, or a unanimous vote in favor when the operating agreement is silent, can a new membership interest be created.

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Step 3

Determine the amount of contribution the new member must make. It is not essential that the current LLC members require a contribution from a prospective member, but it’s common to require one. Unless the operating agreement states the amount, a sufficient number of current members must agree on the contribution amount, which can be in cash as well as tangible or intangible assets.

Step 4

Present LLC membership terms to the new member. Since new members must adhere to all terms of the operating agreement that exists at the time of joining the LLC, it’s advisable -- though not a legal requirement -- to provide the new member with a copy of the agreement before finalizing her membership. The operating agreement is the authority on all LLC activities, and, therefore, prospective members considering making an investment in the LLC should be aware of any limitations on their authority to manage business operations.

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References

Related articles

How to Add a Member to an LLC Company

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.

LLC & Profit Distribution

The members of a profitable limited liability company are entitled to receive periodic distributions from the business’s earnings. Most jurisdictions provide the framework for the types of distributions that may not occur. However, LLC members are free to stipulate the terms and eligibility requirements for distributions that do not inherently violate state regulations.

Who Is Liable in an LLC?

All jurisdictions within the United States allow business owners to create a limited liability company structure. The most common reason for creating an LLC is for owners to obtain the benefit of limited personal liability. However, the formation of an LLC does not provide owners, who are called members, with an unrestrictive license to avoid personal liability for all activity. Limits on liability are only available for activities within the scope of ordinary business practices.

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