Tennessee Sale and Assignment of a Percentage Ownership Interest in a Limited Liability Company

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US-01377BG
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Description

A limited liability company (LLC) is a separate legal entity that can conduct business just like a corporation with many of the advantages of a partnership. It is taxed as a partnership. Its owners are called members and receive income from the LLC just as a partner would. Management of an LLC is vested in its members. An operating agreement is executed by the members and operates much the same way a partnership agreement operates. Profits and losses are shared according to the terms of the operating agreement.


A membership interest may be used to refer to the ownership interest of a member in the LLC. The word unit is often used to reflect the membership interests of a member in the LLC. Some LLC's issue membership interest certificates. To become a new member of the LLC the consent of majority of the members is necessary. A transfer of units of an existing member does not automatically include membership into the LLC.

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FAQ

While LLC members can have different ownership percentages, the ownership interests of all members in total must add up to 100%.

LLCs can create different classes of LLC Members in the Operating Agreement, with different voting rights based on factors like total ownership interest, capital contributions, or management responsibilities.

By default, all profits are allocated by ownership percentage (the same as in a general partnership). This means that if John and Pete equally invested in and own an LLC together, they'll both be allocated 50% of the profits. If you want to allocate profits differently, you can do that in your operating agreement.

Ownership percentages are important because they determine what profits you're entitled to from your business. They're also important when you apply for a small business loan.

LLC ownership percentage is usually determined by how much equity each owner has contributed. The ownership interest given to each owner can depend on the need of the limited liability company and the rules of the state where the LLC has been formed.

How to Transfer Tennessee LLC Ownership Step 1: Review the LLC's Operating Agreement. ... Step 2: Obtain Consent From Other Members. ... Step 3: Determine the Value of the Ownership Interest. ... Step 4: Draft and Sign a Transfer Agreement. ... Step 5: Update the LLC's Operating Agreement and Membership Records.

An LLC Operating Agreement can also provide for non-proportionate distributions. This is rare. If you want to do this, you should consult a business attorney for a customized Operating Agreement. You should also tell your accountant since this affects tax calculations.

In the case of corporations, an ownership interest is represented by ownership of voting stock. In the case of partnerships or limited liability companies, an ownership interest is represented by total interest in capital and profits.

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Tennessee Sale and Assignment of a Percentage Ownership Interest in a Limited Liability Company