How would I show who owns what shares in my LLC?

Q: What is a resolution in the context of an LLC?

A resolution in an LLC is a formal document that records decisions made by the members or managers. It can address changes in ownership, management, or operational procedures. Resolutions help ensure that all members are informed and in agreement about significant business decisions.

Q: Do I need a buy-sell agreement for my LLC?

A buy-sell agreement is advisable for LLCs, especially when there are multiple members. It outlines the process for transferring ownership interests, ensuring a smooth transition if a member wants to sell their share or in the event of death or disability. This agreement helps prevent disputes among members.

Q: How do I amend my LLC's operating agreement?

To amend your LLC's operating agreement, you typically need to draft a written amendment that specifies the changes. This document should be approved by the members as outlined in the original operating agreement. Once approved, the amendment should be kept with the original agreement for reference.

Q: What are authorized and issued units in an LLC?

Authorized units refer to the total number of ownership units that an LLC can issue, while issued units are those that have actually been distributed to members. Understanding the difference is important for ownership structure and equity distribution among members.

Full question:

I started my business as a single member LLC in November 2006. On December 31st 2007, I granted 7% of the business to a partner. I want to establish that the business has 100 million authorized units with only 10 million issued. Thus I have 9.3 million units and my partner has 700,000 at this point.What legal documents do I have to produce to document this? Would this be just a resolution of the LLC, or the authorized number (100 million) has to be written in the Operating Aggreement as well?

Category: LLC
Date: 04/07/2025
State: Washington

Answer:

A LLC may make a resolution to amend the operating agreement. The LLC operating agreement may vary in complexity, and typically contains the following information:

* Company name and address information

* Registered agent information

* Name and address information for each LLC member

* LLC management structure and operation

* Items contributed by each Member

* Fair market value of each item contributed

* Date of company dissolution

* Accounting method

* Tax treatment for your LLC

* Sample LLC operating resolutions

* Appointment of LLC officers

* Designation of a final capital pay-in date

The following is an example of an section of an operating agreement of a LLC:

2.3 LLC Units

Ownership of the LLC shall be divided into and represented by units of the
LLC ("Units"). The LLC shall be authorized to issue six classes of units,
Common Units, Series A Units, Series B Units, Series C Units, Series D
Units and Series E Units. The total number of Units the LLC is authorized
to issue shall be 6,000,000, of which 1,000,000 shall be Common Units,
1,000,000 shall be Series A Units, 1,000,000 shall be Series B Units,
1,000,000 shall be Series C Units, 1,000,000 shall be Series D Units, and
1,000,000 shall be Series E Units.

2.4 Voting Rights of LLC Units

Each Common Unit shall be entitled to one vote per Unit, each Series A
Unit shall be entitled to 10 votes per Unit, each Series B Unit shall be
entitled to 10 votes per Unit, each Series C Unit shall be entitled to 10
votes per Unit, each Series D Unit shall be entitled to 10 votes per Unit,
and each Series E Unit shall be entitled to 10 votes per Unit.

2.5 Additional Members, Issuance of Additional Units

Additional Persons may be issued Units and admitted to the LLC as Members
upon compliance with the provisions of this Agreement and upon such terms
and conditions as the Managers may determine, provided that:

2.5.1no new class of Units or interests having rights or preferences
senior to those of the existing Units may be issued without the
approval of Members holding a majority of each class of such
outstanding subordinate Units; and

2.5.2the Managers may not issue more than the total number of authorized
Units, without the approval of the Members.

Existing Members may be issued additional Units, upon compliance with the
provisions of this Agreement and upon such terms and conditions as the
Managers may determine, provided that no new class of Units or interests
having rights or preferences senior to those of the existing Units may be
issued without the approval of Members holding a majority of each class of
outstanding subordinate Units, nor may the Managers issue more than the
total number of authorized Units of the LLC without the approval of the
Members.

A buy - sell agreement is useful in assuring the orderly transfer of interests in the partnership or corporation. I am prohibited from giving legal advice, as this service provides information of a general legal nature. I suggest consulting a local attorney who can review all the facts and documents involved.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

What is an operating agreement for an LLC?

An operating agreement is a key document for an LLC that outlines the management structure and operational procedures. It details member roles, ownership percentages, and the distribution of profits and losses. This document is crucial for establishing rules and expectations among members, especially when ownership changes occur.