How to Document Members in a Limited Liability Company

By Terry Masters

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.

Step 1

Obtain the names, addresses and U.S. Social Security numbers, or taxpayer identification numbers, of all members. This is the minimum amount of information that should be kept on file for every member with an ownership interest in the company.

Step 2

List the members on the LLC's articles of organization or other state filing, if required. Some states require an LLC to disclose the names and address of members as part of the articles of organization. A few states require an annual filing of a member list disclosing the names and addresses of current members.

Ready to start your LLC? Start an LLC Online Now

Step 3

List the members and their addresses in the company's operating agreement. State law suggests, but rarely requires, an LLC to adopt an operating agreement at the outset of business. This agreement should list the names and addresses of the members, their initial ownership percentage and be signed by all members. Every time a new member is added or an existing member withdraws, the operating agreement should be restated or amended.

Step 4

Establish a capital account for each member on the company books. The company should maintain a capital account for each member as part of the company's accounting system. The capital account is the value of the money, property and services the member initially contributed to the company to capitalize his interest, less any withdrawals the member has taken, plus any additional contributions made over time.

Step 5

Provide an accurate accounting of the LLC's ownership and each member's distributive share of profits and losses on state and federal tax returns. The company's tax returns require the disclosure of the name, address and Social Security number of each member, the member's ownership percentage as reflected in any change in the member's capital account, and the percentage of profits and losses that are attributable to each member, if the percentage differs from the ownership percentage.

Ready to start your LLC? Start an LLC Online Now
How to Buy a Partner's Shares of LLC
 

References

Resources

Related articles

How to Add a Member to an LLC

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.

How to Add Capital Contributions to an LLC

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.

How an LLC Claims Profit and Losses

A limited liability company, or LLC, is a business entity type that has a history in the United States that spans decades rather than centuries. The relative newness of the format means that the Internal Revenue Service has yet to recognize the LLC as a specific tax entity type. Instead, the IRS classifies an LLC as one of the existing entity types that are defined in the tax code, based on the number of owners, known as members, and the tax elections those owners make. Single-member LLCs can elect to be taxed as a sole proprietorship or a corporation. Multiple-member LLCs can elect to be taxed as a partnership or a corporation. The way a LLC claims profits and losses depends on this tax election.

LLCs, Corporations, Patents, Attorney Help

Related articles

How Do Capital Accounts in LLCs Work?

An LLC's capital accounts allow the company to maintain an accurate accounting of each member's contributed cash or ...

How to Add a Member to an Existing LLC

An LLC is a flexible business entity that has almost unlimited ability to organize its ownership under an operating ...

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 ...

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