Can an LLC Be in Two Names?

By Larissa Bodniowycz, J.D.

Can an LLC Be in Two Names?

By Larissa Bodniowycz, J.D.

A limited liability company (LLC) is a favored type of entity for small businesses. It is often described as a hybrid that combines the best parts of corporations with the best parts of a sole proprietorship.

Two women reviewing paperwork

One of the most attractive aspects of forming a business as an LLC is that it's tailored to fit the business. The LLC structure is flexible enough to allow more than one owner. LLCs with two owners, called members, decide together on key issues such as management, ownership percentages, tax status, and how dispute resolution ahead of time.

Management

The roles of managers are to oversee and manage the LLC's day-to-day operations. Members (owners) or third-party managers, which are individuals hired from outside the company, run the LLC. Third party managers usually require payment for their role in managing the LLC.

Percentage Ownership

LLCs with two members can divide ownership of the LLC equally or unequally. Splitting ownership unequally is a common choice if one LLC member will be more active in operating the business. For example, the heavily involved member may earn a 75 percent ownership interest and the other more passively involved member may earn a 25 percent interest.

By default, in most states, profits and losses are split between the members proportionate to their percentage ownership. However, members can choose to split profits and losses in a different way. The operating agreement is essential for spelling out the rules of the LLC.

Tax Status

An LLC with multiple owners retains tax flexibility. By default, LLCs with two members pay taxes like partnerships. The income earned passes through and the members pay personal taxes on it. Alternatively, the members can file an election to have the LLC taxed in the same manner as a corporation. LLCs that elect this status pay taxes on income at the LLC level, and again, on their personal income taxes for income taken home.

Resolution of Disputes

At some point, LLC members are likely to disagree with one another on a decision. This is particularly problematic if the LLC only has two members with equal voting power. Deciding how to resolve disagreements ahead of time can avoid a forced termination of the LLC due to deadlock.

Members can resolve disputes regarding the LLC in almost any legal manner they decide. For example, they can agree to have a designated third party break the tie or although it is not recommended, can agree to flip a coin. The LLC's Operating Agreement may include the manner to use in breaking a tie.

Putting Decisions in Writing

Once made, LLC members should write their key decisions in the LLC's Articles of Organization and Operating Agreement. An online legal service provider or business attorney can assist in preparing these and other documents required to form an LLC.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.