Last updated July 2, 2021
Can there be two owners of an LLC?
Yes, there can be two owners of an LLC.
LLC owners are called “Members“. And when an LLC has two or more Members, it’s called a Multi-Member LLC.
There is actually no limit to the number of Members an LLC can have. An LLC can have one owner or an LLC can have hundreds or thousands of Members.
Who can be an owner of an LLC?
The owner of an LLC can be a:
- US citizen
- US resident
- Non-US citizen
- Non-US resident
- Another LLC or company (US or non-US company)
How does a two-owner LLC pay taxes?
Two-owner LLCs are taxed by the IRS like a Partnership.
- the LLC has pass-through taxation, and
- the LLC files a 1065 Partnership Return
What is LLC pass-through taxation?
LLC pass-through taxation is when the LLC doesn’t pay tax itself. Instead, the Members pay the taxes on their personal tax return. This avoids double taxation.
What is a 1065 Partnership return?
The 1065 Partnership Return is an “informational return” filed by the LLC. This means there is no money due and the form is just reporting information about the LLC’s income.
The LLC then issues (most likely via your accountant) K-1s to the LLC owners. This shows their share of the profits. From there, the LLC owners report their K-1 income on their personal tax return (Form 1040).
The reason an LLC is taxed like a Partnership is because there is no “LLC tax classification” with the IRS. Meaning, the IRS doesn’t tax an LLC “like an LLC”.
Instead, they tax LLCs under already existing classifications (like Sole Proprietorships, Partnerships, and Corporations). And for two-owner LLCs, that default classification is Partnership taxation.
How do you split ownership of an LLC?
You will split ownership of the LLC in your LLC Operating Agreement.
Your LLC Operating Agreement spells out who owns the LLC and how much they own.
We have a free Operating Agreement form you can download here: LLC Operating Agreement.
Should my LLC be a one-owner LLC or a two-owner LLC?
The decision is up to you.
However, we often notice that if people are unsure if they should add a second Member, it’s usually best to wait and think carefully about it. It’s usually a sign of hesitation.
Additionally, you can still work with the other person (without making them an LLC owner). For example, your LLC can hire them as an independent contractor or employee and you can pay them commission or wages.
Hope that helps!