An LLC can have one, two, or several owners. In fact, there's no limit in most states on how many members an LLC can have. Learn how multi-member LLCs operate, how they differ from traditional partnerships, and the administrative steps required to manage or change ownership.
Single-member vs. multi-member LLCs
A limited liability company (LLC) is a business entity type that can have one or more owners. These owners are referred to as “members” and can include individuals, corporations, other LLCs, and foreign entities.
An LLC with one owner is known as a single-member LLC. By default, a single-member LLC is taxed as a sole proprietorship for federal income tax purposes, meaning the business's profits and losses pass through to the owner's personal tax return. The single member also has complete control over the business, since there are no other owners to consult on decisions.
An LLC with multiple owners is known as a multi-member LLC. By default, a multi-member LLC is taxed as a partnership, with profits and losses passing through to each member's personal tax return based on their ownership percentage. Unless the operating agreement states otherwise, a multi-member LLC is member-managed by default, meaning each member has an equal right to participate in managing the business.
Most states do not restrict LLC ownership, and there is generally no maximum number of members an LLC can have.
Both single-member and multi-member LLCs also have the option of being manager-managed, where one or more designated managers (who may or may not be members) handle day-to-day operations instead of all members sharing management duties.
How does an LLC differ from a partnership?
There are two key differences between an LLC and a partnership: how they are formed, and how much of an owner's personal money and property are at risk if the business gets sued or can't pay its debts.
A partnership is a business where two or more individuals operate the company as co-owners. Share of ownership can be split 50/50 or at any percentage, as long as the total adds up to 100%.
Partnerships are relatively easy to set up. No paperwork needs to be filed with the state, and a partnership can be formed as soon as the co-owners start the business.
In contrast, forming an LLC requires requires several administrative steps, including filing Articles of Organization with the Secretary of State, selecting an available business name, preparing an operating agreement, and maintaining a registered agent.
The second difference is that the LLC exists as a separate legal entity from its owners. This means that the owners (referred to as members) aren’t held personally liable for most debts and liabilities incurred by the business.
For more information, see LLC vs. partnership (GP, LP, and LLP): Which business structure is the best choice for multiple business owners?
Married couples: Single-member LLC or multi-member LLC?
As a rule, when an LLC has co-owners, it is considered a multi-member LLC. But when those members are married, an exception can apply.
If an LLC is co-owned by a married couple who reside in a community property state, and the LLC was formed in that state, it can be treated as a single-member LLC for federal tax purposes. This requires meeting the following criteria:
- The LLC is wholly owned equally (50/50) by each spouse as community property in states that have community property laws.
- No other owners are reported on the LLC’s federal tax return.
- The business is not a corporation.
If the LLC doesn’t meet these requirements, it is considered a multi-member LLC and taxed as a partnership.
Can an LLC have shareholders?
LLCs cannot have shareholders.
Shareholders are the owners of a corporation. Ownership in a corporation is divided into units called stock, and each individual unit is called a share. When someone owns shares of a company's stock, they're referred to as a shareholder.
Instead of shareholders, LLCs have members who own membership interests in the LLC. A membership interest is a member's ownership stake in an LLC, representing their share of the company's profits, losses, and voting rights.
How do I add or remove a member from an LLC?
To add or remove a member, start with your LLC's operating agreement. Follow its procedures for approving the change, including any required member votes. Once approved, amend the operating agreement to reflect the updated member roster and ownership stakes.
Next, check your state's requirements. Some states list LLC owners publicly and require you to file Articles of Amendment or update member names in your annual report.
If your LLC is foreign qualified (registered to do business in another state), you'll also need to meet that state's disclosure rules. If it requires members or managers to be listed on public record, update that state agency too, typically through your next annual report or an amended foreign qualification. Skipping these filings can put your foreign LLC qualification at risk and cost you your authority to do business there.
You may need to notify the IRS as well. If the member you're removing was the designated Responsible Party, you must name a new one and file Form 8822-B within 60 days of the change.
Consider, too, whether adding or removing a member changes your company between a single-member and multi-member LLC, as this will alter your LLC's default federal tax classification.
Don't forget to update your bank, insurance providers, and local licensing agencies. Many business licenses and insurance policies require prompt notice of ownership changes, so skipping this step could mean fines, coverage gaps, or a suspended license.
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