A Limited Liability Company with two or more owners, called members, who share in the ownership, management, and profits of the business.
What is a Multi-Member LLC?
A multi-member LLC is a business structure that offers liability protection to its members while allowing for flexible management and profit-sharing arrangements. Ownership is divided among two or more members, and each member’s rights and responsibilities are typically outlined in the operating agreement.
For tax purposes, the IRS generally treats a multi-member LLC as a partnership by default, meaning the company itself does not pay income tax. Instead, profits and losses are passed through to the members, who report them on their individual tax returns according to their ownership percentage or another allocation agreed upon in the operating agreement. However, a multi-member LLC can also elect to be taxed as a C corporation or an S corporation if eligible.
Management in a multi-member LLC can be either member-managed, where all owners participate in daily operations, or manager-managed, where designated managers handle operations. This structure is common among business partners, investors, or family-owned companies. For non-U.S. members, this type of LLC allows shared ownership in a U.S. business, but it also means that each member must consider their own U.S. tax obligations, which may involve filing specific IRS forms such as Form 1065 and receiving a Schedule K-1.
