How Is Capital Organized In Limited Liability Companies?In a limited liability company ("LLC"), financial rights and control of the company through voting rights are given according to contributions to the company. This limits your exposure of risk only to the amount of money you have invested in the company. If you have helped the company by making large and unsecured loans or personal guarantees, then you can usually negotiate a greater amount of control for yourself because you have added more risk.
What Counts As a Contribution?A contribution may come in many forms, including cash, property, services, promises to provide those things, or debt guarantees. It is important that you put any agreements for your contributions in writing and keep a record, particularly if voting rights or control of the company depend on the amount of contribution you make. Also be sure to separate out personal loans to the company from contributions.
Is There a Minimum Amount Of Contributions That I Need To Make?No, one of the benefits of a limited liability company is that there is no minimum amount of contributions that you need to make to be a part of the company. In fact, you may become a member of a LLC even providing nothing! Of course, the company may require a minimum amount of contribution because it does have to consider its capital needs and how to keep itself out of debt.
If I Want To Leave The Company, Can I Take Property Instead Of Cash As My Return?Generally No. To avoid unscrupulous actions that would cripple the company, the law does not allow an investor to leave with property instead of cash, even if the investor contributed the property in the first place.
One of the negative aspects of limited liability companies is that it may be extremely difficult to sell your interest in the company. It is possible to negotiate and contract your way into receiving property instead of cash but that is rare, especially if the company faces debts it cannot repay.
Do I Need an Attorney Regarding My Contribution To A Limited Liability Company?Capital contributions to a LLC often create disputes and relationships sour quickly if they are not handled properly. Hiring and experienced attorney will help protect your investment and yourself from losing money unnecessarily. |
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