Business organization

[Jared Young]

Jurisdiction

Arizona

Can we create a business where the ownership percentage of an llc is strictly tied to monetary value in the company not voting/decision making power in the business.

Example there are 3 business partners one wants 51% of the company and the other 49% is split between the other two partners. What we want to happen is all have equal power in the company as far as making decisions and voting rights and have the ownership percentage is how we split up profits. What we dont want is the 51% owner to be able to force out or out vote the other two partners. Is this possible to do?

 

[PayrollHRGuy]

You can have the rules of your choosing added to an operating agreement. But all three members would have to agree to those rules.

 

[zddoodah]

Yes.

P.S. Owners of an LLC are called members, not partners.

 

[army judge]

Can we create a business where the ownership percentage of an llc is strictly tied to monetary value in the company not voting/decision making power in the business.

If that is the way you wish to operate, I suppose you can.

Example there are 3 business partners one wants 51% of the company and the other 49% is split between the other two partners. What we want to happen is all have equal power in the company as far as making decisions and voting rights and have the ownership percentage is how we split up profits.

Ahhh, what you desire is very easily achieved, equality among members is achieved by giving all members a 1/3 share in the entity you wish to create. To do anything else won't achieve the equality you desire, UNLESS you create a multitude of rules.

I suggest you investigate creating a Multi-Member Limited Liability Corporation (MMLLC).

A Multi-Member LLC (MMLLC) and is the term used for an LLC that has 2 or more Members (owners).

There is no limit to the number of Members a Multi-Member LLC can have, the Members can be individual people, or they can be companies (like another Corporation or LLC).

One might create a Multi-Member LLC to protect the personal assets of the Members. However, you'll require a number of rules to prevent a member with 51% ownership from running roughshod over the two minority owners with their combined 49% stake. I doubt the 51% owner will be willing to consider an equal split, but nothing ventured, nothing gained.

I suggest the members meet with and retain an attorney to assist them in creating the MMLLC.

Ford Motor Company attempted a similar management effort during the latter part on the 1970s. Lee Iacocca wrote in his autobiography, that Henry Ford, II called Iacocca into his office shortly before 3:00 PM on July 13, 1978 and let him go, telling him "Sometimes you just don't like somebody."

My point is that as Henry Ford, II (also said) about Ford's triumvirate CEO folly, when asked if there was a dispute among the trio how is it resolved ford replied, "One is more equal than the others."