Add Member to LLC

Hi, Lee Phillips here. I’m an attorney.
Like I always say, don’t hold that against me. What I want to talk about is how you
would add another guy, another member stockholder only in LLC language it’s called a “member” how you add another person to the ownership of an LLC and it’s pretty easy. The individual needs to somehow move “consideration” as we would call it into the LLC. It pays the person buys into it they do sweat equity–
they work their way into it. If you just give them membership in the LLC did you notice that word, “give”? then that is a gift to them of the value of the membership of the LLC whatever that value is. If there’s a million dollars in
the LLC and you give 25% of it then you gave them a quarter of a million dollars
worth of value. Now I understand discounting and all that crap but basically
that’s what we’re doing. So they buy into it somehow or you gift it then you need to have a minute entry that says that we are accepting Joe as a new member of the LLC I’m assuming that this is a little LLC and we’re not talking about lots of members. You could have LLC’s that have lots and lots of members if they’re taxed under Chapter C of the IRS code but we’re assuming this is a little
mom-and-pop LLC and we want to add our son. Or or some states now are requiring
multiple members more than one member in an LLC in order to get the charging
order protection. So you set up an LLC you’re the only member and the state, you learn, or the state changes its laws and says you need multiple members
of your LLC. Well the way you get them in is you have the minute entry then you have to issue a membership certificate so you should have a logbook it’s like a stock ledger and you issue a stock certificate or a membership certificate #2 to Joe and he gets such-and-such a percentage of the interest in the LLC. So that’s pretty easy so far. Some states require that you list the LLC members on the state records. And most of the time you’re
gonna get an annual update you need to update the state and you have to pay
your fees and all of that sort of thing and if they require that you list the
members at least when you get the annual update you need to put the new member on
there otherwise you can if they require and you should do it pretty quick actually not wait for the annual you can file an amended document with the state and show the additional member so there could be a state aspect of it there’s a bookkeeping aspect of it and there is a minute aspect of it a meeting acceptance aspect of it. Now you need to read your operating agreement because the operating agreement may say that there’s a procedure for accepting a new member or if Joe has sold his membership interest
to somebody else then other members may have a first right of refusal so we have to follow the rules and the rules are your operating agreement read the operating agreement see what it is but basically it’s accept a guy in the minutes change the stock ledger, issue the certificate and then, if required update it with the state. We now have another member of the LLC that doesn’t satisfy the question do I have a multi-member LLC for the state requirements in order to get the charging order protection charging order protection–that’s another YouTube video that we’ve got and the multiple member requirements to get the charging order is another video also. So how do you get a new member? Follow the rules and there’s this basic structure that you’re going to do.

5 thoughts on “Add Member to LLC

  1. Lee! Excellent videos. I just started an LLC in the state of Wyoming because it has minimal restrictions. I'm from Rhode Island and the business is a mobile app development company, which sells through the Apple App Store. Do I need to worry about RI laws or Wyoming? I figure Wyoming because that's where the company is filed, also I have a registered agent (Legal Zoom) so I'm covered on that basis.

    Questions –

    Operator's Agreement for the State of Wyoming, Should I just grab one online or pay legal zoom to do it?

    Adding Members – Should I keep paying $100 to Legal Zoom or is there a template I can just add people to and file it off myself?

    Non-Disclousre Agrement – Can I add a non-compete clause?

    Thank you for your videos, they've been helping me through this.

  2. What if my LLC acts as a Real Estate investment "fund" as in there are a couple of properties in the LLC and I bring in an investor, who for a certain amount of money would get a certain contracted return on investment, but not grow as the company does. Is this possible to do by adding them as a limited partner? Can I write them down as lets say $100,000 equity instead of percentage?

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