• June 30, 2021

Who can be a member of an LLC?

One of the underlying principles behind the limited liability company is that it was created by legislators to be the easiest and most flexible legal entity to be used for a variety of purposes.

While running a business is the most common use, it is also used for holding real estate or other assets, family ownership, self-directed IRAs and other investment holdings, and estate planning.

Due to its many uses, this type of vehicle must be flexible enough to have many different types of people or other entities as owners.

General rule: the bylaws do not impose limitations on members

A member is the technical term used to designate an owner.

Because of this desired flexibility, the laws of all states do not impose residency or citizen restrictions on who can be a member of a limited liability company. Despite this, the most common question about this type of entity is who can own one.

First, you don’t have to be a resident of a state to own an LLC formed in that state.

Second, you don’t even need to be a resident or citizen of the United States. There are many legal entities that are owned by foreign individuals and companies.

Third, any type of legal entity can own one or an interest in one. For example, a member of an LLC can be individuals, corporations, trusts, partnerships, or other limited liability companies.

There are some exceptions

The above rules apply to businesses in general. Some states have professional LLC entities. These entities have significant ownership limitations. In general, each member must be licensed to provide the regulated service for which the legal entity was created.

If you plan to conduct business regulated by other state departments, those regulations may impose member and other limitations. Consequently, it is important to check all applicable laws and restrictions when deciding who can and should be a member of your business.

The operating agreement may impose limitations

While LLC laws do not impose restrictions, it is important to review a particular operating agreement to confirm that there are no contractually imposed restrictions. The statutes allow each limited liability to impose its own set of rules and restrictions.

The operating agreement is the official document that establishes ownership and establishes a set of rules, policies, and procedures to be followed by members, managers, and the company itself.

With respect to members, the agreement will generally have a complete section that describes how one becomes a member and the rights and obligations of each.

If you are forming a new LLC, you must ensure that your agreement does not impose any residency restrictions on who can own the entity.


As you can see, this determination really depends on the nature of the particular company and its business, the operating agreement, and the specific laws and regulations of each state.

Granting member status to a person or another entity is a big problem. When one becomes a member, certain rights arise. The new person is your partner (sometimes for life) in the business.

Because this step is so important, be sure to think carefully about all the implications and retain the services of a competent attorney to help protect your interests and those of your business.

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