6+ Facts About LLC Shares
December 1, 2021
“83% of people have considered BUYING stock, and 12% have thought of SELLING stock.”
Is that accurate? Who knows!
Do LLCs have shareholders? Are “LLC shares” a thing?
Well, No!
LLCs do not have the option to have shares.
All you need to do is follow the guidelines below.
Key Facts About LLC Shares:
- LLCs and Shares: Limited Liability Companies (LLCs) do not issue shares or stock. Unlike corporations, LLCs are not publicly traded entities and therefore do not have shareholders.
- Definition of Shareholders: Shareholders, or stockholders, are individuals, companies, or institutions that own at least one share of stock in a corporation. Owning stock typically grants a percentage of ownership, voting rights, and possibly dividends, but shareholders are usually not involved in the day-to-day operations of the corporation.
- LLC Ownership Structure: In an LLC, the owners are referred to as "members," not shareholders. The IRS recognizes the owners of an LLC as members. These members oversee the daily operations of the business, and their ownership is not necessarily equal.
- Operating Agreement and Membership Units: The ownership interests in an LLC are outlined in the operating agreement. This document specifies the amount of ownership each member has, often in terms of "membership units" or "member interests." These units can be further categorized into voting and non-voting units.
- Difference Between Corporation Shareholders and LLC Members: The key distinction lies in the nature of ownership and the structure of the entity. Corporations have shareholders who own shares and are generally not involved in daily operations, while LLC members have membership interests and often play a role in managing the business.
The article clarifies the fundamental differences between corporations and LLCs in terms of ownership, highlighting that LLCs do not have shares or shareholders but are owned by members as per the terms set out in the operating agreement.
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START NOWWhat Exactly Are Shareholders?
In order to fully understand the deal with “LLC shares”, you need to first straighten out a few things.
A shareholder (stockholder) is a person, company, or institution that owns at least one share in a private corporation.
Meaning that “stock” is a term that is used when it comes to corporations.
When you buy stock, you are buying rights to:
- A percentage of ownership
- Votes
- Maybe dividends.
But, you aren’t usually involved in the day to day business of the corporation.
Each “share” is an equal percentage of ownership in the business.
Whats the story with "LLC shares"?
When it comes to LLCs, however, the terms “stock” or “shares” don’t go. Meaning, if you use such terms, you will not sound the smartest (if you catch the drift). In fact, LLCs DO NOT issue neither stock nor shares. They are NOT traded publicly. For this reason, you will not be able to find a publicly traded LLC.
So the answer is NO! LLCs do not have shareholders. They are not publicly traded companies. Instead, the term used is, “members”. Just ask the IRS. They consider owners of an LLC as “members”. They go on to explain who qualifies to be a “member”. That’s for another day.
The “members” of an LLC are the guardians who oversee the daily operations of the business. Not every member has an equal ownership in the LLC.
Typically, the operating agreement clarifies the exact amount of ownership each member has. It designates how many “membership units” or “member interests” each member has. These “units” can break down further into voting units and non-voting units.
